SEC submissions push for self-custody, proprietary trading in tokenized and DeFi markets

New submissions filed with the US Securities and Exchange Commission discuss self-custody rights and the regulation of proprietary trading in tokenized and decentralized finance markets. 

According to the SEC’s registry, the submissions were added on Tuesday to the SEC Crypto Task Force’s “Written Input” page. Lawmakers and regulators are still unsure what to do about the stalled federal crypto market structure bill, the CLARITY Act.

One letter was filed by a Louisiana state individual identified as DK Willard, while the Blockchain Association Trading Firm Working Group submitted the other. Both of the filings discuss how existing and future regulations should treat self-directed activity, liquidity provision, and innovation in on-chain markets.

Louisiana cites HB488 to encourage self-custody regulatory approval

According to the author of the state’s letter, DK Willard, state-level House Bill 488 affirms the right of Louisiana residents to hold and manage digital assets through self-custody. The filing argues that federal lawmakers should respect and preserve those protections in their finalization of nationwide crypto regulations.

Willard explained that self-custody is a foundational principle that any federal crypto market structure framework should not meddle with, and watchdogs should let individuals control their own digital assets.

“Louisiana has made strides to embrace digital assets and protect those who own them. Now it’s time for Congress to build financial markets with commonsense safeguards for investors from all walks of life,” the submission states.

DK Willard also references progress in the House of Representatives, noting that lawmakers passed a draft of the bipartisan market structure bill that attempted to strike a middle ground. 

Here's a quick summary of what happened last week with the CLARITY Act.

Now we're all working together to find a win-win scenario for everyone, especially the American people. pic.twitter.com/Wcry97B3qf

— Brian Armstrong (@brian_armstrong) January 21, 2026

“Congress should build on that foundation and avoid letting controversial provisions added to Senate proposals block progress on innovative reforms where there is already bipartisan consensus,” they asserted.

Blockchain Association seeks clarity on dealer rules

The second submission, filed by the Blockchain Association Trading Firm Working Group, focuses on how the SEC should interpret dealer registration requirements under the Securities Exchange Act.

The group asked the Commission to clarify whether firms trading solely for their own account should not automatically be classified as dealers. According to the BA, these firms do not solicit customers, hold customer assets, or execute trades on behalf of others.

According to the filing, treating proprietary trading firms as dealers simply because they trade on-chain could improperly expose them to the law. The group believes dealer rules were meant for customer-facing intermediaries in traditional finance, not for liquidity providers using their own capital.

The working group warns that without enough trading firms, tokenized equity markets could suffer from price dislocations in tokenized assets, damaging investor confidence and market integrity. It also argues that to achieve these objectives, firms must be able to engage in on-chain trading, price discovery, and cross-venue arbitrage without fear of dealer registration requirements.

“Clear regulatory treatment of on-chain liquidity provision, paired with adequate implementation timelines, will enable fair and orderly markets, and efficient price discovery at the outset of tokenized securities trading in the United States. We appreciate your work on these issues and welcome the opportunity to engage further,” the association wrote.

CLARITY Act future uncertain as Ripple CEO calls for compromise

The submissions were made as negotiations over the CLARITY market structure bill continue on Capitol Hill. Democratic and Republican lawmakers are attempting to reconcile differences between House and Senate proposals.

Senior White House crypto adviser Patrick Witt has told proponents in the industry to consider compromises to move the legislation forward.

In an X post, Witt told off Coinbase CEO Brian Armstrong, who said “no bill is better than a bad bill,” arguing that the naysayers of the current bill’s draft have the privilege to stall its passing due to the Trump government’s flexibility.

“No bill is better than a bad bill.”

What a privilege it is to be able to say those words thanks to President Trump’s victory, and the pro-crypto administration he has assembled.

But let’s not kid ourselves. There *will* be a crypto market structure bill — it’s a question of…

— Patrick Witt (@patrickjwitt) January 21, 2026

Speaking from Davos on Wednesday, Coinbase chief executive Armstrong revealed that progress was being made on advancing the legislation. “We’re all working together to find a win-win scenario for everyone, especially the American people,” Armstrong said.

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