The Solana Policy Institute urged the SEC to protect DeFi developers from regulations
Update (January 13, 2026, 9.45 am UTC): This article has been updated to clarify the legal status and jurisdiction of recent cases involving Tornado Cash developers.
The Solana Policy Institute, a nonprofit focused on blockchain policy, has urged the US Securities and Exchange Commission (SEC) to clearly distinguish between centralized crypto exchanges and deregulated decentralized finance (DeFi) software, arguing that developers publishing open source code should not be treated as market intermediaries.
In a letter to the agency on Friday, the institute said developing and deploying unregulated smart contract software is fundamentally different from running an exchange because developers don't own user assets, monitor transaction performance or exercise leverage over funds.
The letter states that the application of Rule 3b-16 of the Securities Exchange Act – which defines what an “exchange” is – is not relevant for non-custodial DeFi protocols, as the rule is intended to cover platforms that control assets, intermediate trading or execution flow.
“Transactions through a smart contract protocol are not equivalent to trading on an exchange or ATS and should not be treated as such.”
The agency asked the SEC to issue guidelines to identify unregulated software tools and exchanges with brokers.
The agency also proposed amending Rule 3b-16 to exclude open source code from the definition of “exchange” and adopt a custody-and-control framework to draw lines between centralized and decentralized blockchain activity.
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The letter went on to argue that treating DeFi Code the same as centralized trading platforms would “discourage innovation” and reduce U.S. competitiveness by pushing piracy into “unregulated channels.”
To protect DeFi developers and offshore activities, the SEC “must establish clear, durable lines between software tools and real intermediaries that exercise control, discretion or control over funds and transactions,” the letter added.
The issue of developer liability has attracted attention in recent years, particularly following cases involving developers of non-security protocols such as TornadoCash.
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The trial in the Netherlands of U.S.-based Tornado Cash developer Roman Storm and co-founder Alexey Percev has fueled a debate over whether developers could be exposed to criminal liability for writing and publishing open source code, even when users' funds are not protected or monitored.
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US senators push for blockchain developer protection
Separately, US Senators Cynthia Lammis and Ron Wyden introduced legislation on Monday to protect blockchain developers who do not directly control users' funds.
The Blockchain Regulatory Verification Act seeks to make clear that writing software or maintaining networks should not trigger federal or state money laundering requirements, a growing concern for developers.
“Blockchain developers who simply write blockchain code and maintain open source infrastructure have been around too long to be classified as moneylenders,” Lummis wrote in a statement.
The long-awaited Crypto Market Structure bill, also known as the CLARITY Act, includes similar developer protection measures.
The US Senate Agriculture Committee has delayed its crypto market structure bill until the end of January, with Chairman John Boozman saying the panel needs more time to gain broad bipartisan support. Bozeman said Monday that the committee had made “significant progress” and had “constructive discussions,” but stressed that moving the bill forward with cross-party support was the priority.
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