gm from the Day One Law team!

Today’s legal update includes:

1. What you should know about the latest Senate market structure draft

2. The U.S. Department of Justice’s stance on money transmission

3. Securities and Exchange Commission’s upcoming rulemaking schedule

New Senate market structure draft

Senate Banking Committee Republicans released a new discussion draft of their market structure bill, titled the “Responsible Financial Innovation Act of 2025,” which could eventually become comprehensive digital asset regulation for the industry. The bill includes some notable adjustments from earlier drafts:

DeFi developer protections: Following the Roman Storm verdict, the Senate’s draft was updated to ensure that developers and other individuals contributing to decentralized finance protocols (such as DEXs, validators, liquidity providers, and wallet builders) are not automatically subject to broker-dealer or anti-money laundering obligations.

However, this safe harbor only applies if the developer is non-controlling, meaning the protocol is genuinely decentralized; if a single party has the ability to unilaterally control upgrades, fees, or access, it could still fall within traditional financial regulations. (See page 160 of the full text)

Airdrop & staking clarity: The bill provides explicit legal certainty that “gratuitous distributions” (which includes airdrops, staking rewards, and programmatic token emissions) are not treated as securities “offers or sales.”

This language aims to remove ambiguity for projects that distribute tokens as part of bootstrapping or network maintenance, and to prevent the application of securities registration requirements to routine blockchain operations like validator rewards. (See page 16 for the full definition of gratuitous distributions)

DePIN exemption: Tokens powering Decentralized Physical Infrastructure Networks (DePINs) receive a clear exemption from securities laws if they meet the outlined decentralization criteria, which includes an ownership cap of 20% for any single entity.

This is designed to encourage the buildout of physical networks (for example, decentralized wireless or energy infrastructure) without forcing them into securities frameworks, as long as governance and token economics avoid concentrated control. (See page 156 for the full exemption)

You should know: This draft meaningfully lowers liability risk for protocol contributors, but only if governance and upgradeability are credibly decentralized.

Teams should audit admin keys, treasury concentration, and validator control now, since safe harbor protection only applies to truly non-controlling developers.

The clarification around airdrops and staking rewards is a net positive for token economics, but the resale of tokens on secondary markets remains a gray area that investors will diligence team actions closely for. Getting governance and token mechanics right ahead of financing is the practical move.

DOJ’s updated stance on money transmission

The U.S. Department of Justice clarified its enforcement policy regarding money transmission laws and crypto projects in a speech given in late August.

Acting Assistant Attorney General Matthew Galeotti stated that the DOJ will not treat non-custodial protocols as money transmitters, signaling a shift away from cases like the one brought against Storm for his role as a Tornado Cash developer. This guidance narrows the application of certain money transmission statutes, focusing enforcement on actual criminal misuse (e.g., laundering, fraud) rather than on the mere act of publishing or maintaining open-source code.

The statement follows the disbanding of the DOJ’s dedicated crypto enforcement unit and aligns with the language in the Senate’s market structure draft. It underscores a broader regulatory trend toward distinguishing between developers of decentralized infrastructure and actors engaged in illicit finance, a positive sign.

You should know: The DOJ’s clarification that non-custodial protocols are not money transmitters narrows risk considerably. 

The dividing line is control over funds, not code publication, which should give infrastructure builders comfort. Enforcement will focus on actors misusing systems for laundering or fraud, not developers maintaining open-source protocols. Teams should document how their contracts prevent unilateral movement of user funds so they can evidence non-custodial design if challenged.

SEC’s upcoming rulemaking schedule

On September 4, the U.S. Securities and Exchange Commission released its Spring 2025 Unified Agenda, which listed multiple crypto-focused rulemakings on the following:

1. Offer and sale of digital assets

2. Exemptions and safe harbors for digital assets

3. Modernized custody requirements for digital assets

4. Amended Exchange Act rules to support trading of crypto assets on alternative trading systems and national securities exchanges

SEC Chair Paul Atkins said these efforts aim to provide “clear rules of the road for the issuance, custody, and trading of crypto assets” while encouraging innovation and U.S. market leadership.

You should know: The SEC’s timing means proposed rules will not land until April 2026, leaving an extended period of regulatory uncertainty.

Custody and exchange rules, once issued, will likely increase compliance costs for centralized players while creating possible safe harbors for decentralized models. Projects planning financings or token launches in 2025–2026 should proceed under current frameworks but build flexibility into distribution mechanics and listing strategies to adapt once the SEC finalizes its rule set.

That’s it for your legal update.

As always, please reach out if you have questions or just want to riff on what we’re seeing in the market and the implications of any of the above.

Talk soon.

Nick Pullman
Day One Law