The end of LaMothe's tenure at the SEC: How his guidance continues to shape the crypto ecosystem

As Cicely LaMothe concludes her tenure as Deputy Director of the SEC’s Division of Corporation Finance, the digital asset industry reflects on the lasting impact of her regulatory interpretations. Her departure marks a significant milestone in how Washington approaches cryptocurrency.

LaMothe’s Role in Digital Securities Regulation

During her tenure at the SEC, LaMothe was at the forefront of interpreting how existing securities laws apply to new digital assets. Her work directly influenced compliance strategies for countless blockchain projects and financial institutions.

The Division of Corporation Finance, where LaMothe helped lead, plays a crucial role in reviewing corporate filings and providing interpretive guidance. Her approach was characterized by a methodical analysis of the Howey Test, the legal standard that determines whether an asset qualifies as an investment contract and thus as a security.

Memecoins: LaMothe Unravels a Regulatory Enigma

One of LaMothe’s most significant contributions was the 2024 staff statement on memecoins. This document addressed a growing market segment driven by social media trends, providing clarity on an area that previously generated regulatory confusion.

The guidance established that simply being a meme-based digital asset does not automatically make it a security. Instead, the determination depends on the underlying economic realities. LaMothe’s staff identified three key factors that would trigger classification as a security:

• Expectation of profits derived from efforts of others: Primarily from a centralized development team or promoter
• Fundraising function: If the token launch primarily serves to raise capital for project development
• Ongoing promotion: Systematic efforts by creators to influence market price

This framework allowed segmentation of the market between truly community-driven tokens and unregistered securities offerings, providing relief to many projects while maintaining SEC vigilance against fraudulent schemes.

Following the publication, several projects reviewed their marketing materials and token distribution to align with the established principles. Legal experts widely cited the document in advisory opinions and court filings as reflective of contemporary regulatory thinking.

Staking: The Custodial Distinction Redefining the Industry

Another landmark guidance led by LaMothe addressed staking-as-a-service programs. Staking, where users lock tokens to support network operations and earn rewards, posed a novel challenge for regulatory interpretation.

The SEC staff statement analyzed whether these programs constitute investment contracts, focusing on the role of the service provider and the promises made to participants. The conclusion was clear: centralized staking services, where users relinquish control of their assets to a third party expecting returns from that entity’s efforts, likely fall under securities regulations.

In contrast, decentralized and non-custodial staking performed by individuals for network validation presented a different analysis. This distinction proved crucial for large exchanges offering staking products and proof-of-stake blockchain networks.

A Regulatory Gap Filled by Staff Guidance

LaMothe’s work took place during a transformative era for financial regulation. The SEC, under multiple presidents, struggled to balance investor protection with technological innovation. Her staff’s statements served as navigational aids while Congress debated comprehensive crypto legislation.

These documents filled a regulatory void, providing market participants with actionable insights despite the absence of final rules. Her departure coincides with increased institutional adoption of digital assets. Major banks and asset managers now interact with cryptocurrencies, making clear regulatory signals vital.

Academic Perspectives on the Regulatory Legacy

Legal scholars have commented on the importance of this transition. Professor Alan Michaels of Georgetown Law noted: “Staff interpretations like those led by LaMothe provide critical stability to the market. They offer a window into compliance priorities without the full force of formal regulation.”

Industry advocates express hope that LaMothe’s successor will continue a policy of clarification. Striking a balance between firm enforcement and productive guidance remains a central challenge for the Division of Corporation Finance.

What Remains After LaMothe?

LaMothe’s staff statements remain published as SEC guidance unless formally rescinded or replaced by new rules. They continue to inform the market and compliance approaches.

The precedents set during her tenure will likely influence the SEC’s stance for years to come, establishing benchmarks for how future regulators might address similar technological disruptions in finance. As the regulatory landscape continues to evolve, the foundations laid during LaMothe’s period will serve as critical references for the digital asset industry.