Crypto ETF approvals and enforcement actions likely delayed as funding lapse hits financial regulators.
The U.S. Securities and Exchange Commission (SEC) has begun winding down operations after Congress failed to pass a funding bill, triggering the first day of a government shutdown. According to an operations plan released in August, the agency is functioning with an “extremely limited number of staff”, with most employees instructed to secure their work and prepare for a pause until funding is restored.
“On the first workday of a lapse in appropriations, non-excepted staff will engage in activities to shut down their respective operations,” the SEC confirmed in a notice.
Impact on Crypto Regulation
The shutdown places significant limits on the SEC’s ability to oversee financial markets, including digital assets. The agency will not engage in ongoing litigation or enforcement actions, except in emergencies involving threats to property or investor funds.
This effectively means that crypto-related enforcement cases could be paused, delaying regulatory clarity for firms under investigation.
In addition, the SEC will be unable to review registration applications or engage in non-emergency rulemaking. For the crypto sector, this is most critical for pending cryptocurrency exchange-traded fund (ETF) applications. Several Solana (SOL) ETF proposals were expected to receive review in October, but these approvals will likely face delays.
“The timeline for crypto ETFs may slip, simply because the SEC doesn’t have the staff to conduct reviews,” .
Market and Political Uncertainty
The shutdown comes at a critical moment, as the crypto industry awaits clarity on multiple ETF filings that could expand institutional adoption. Analysts warn that delays could unsettle investor confidence in the short term.
Meanwhile, political gridlock shows little sign of easing. House Speaker Mike Johnson has said Republicans will not compromise on their proposed spending bill, while Democrats continue to push back against healthcare cuts included in the GOP-backed budget.
The SEC has confirmed that its electronic filing system will remain open, allowing companies to submit documents. However, reviews and approvals will not proceed until operations resume. Employees are expected to return on the first workday following new appropriations legislation.
Until then, the shutdown underscores how political battles in Washington can have a direct impact on the future of crypto regulation in the United States.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.