SEC Signals Pivot on Layer-2 Classifications in Landmark Ruling

The Securities and Exchange Commission is weighing a framework that would treat execution layers differently from the base settlement protocols they anchor to, according to a memorandum circulated to staff in the agency's Division of Corporation Finance and reviewed by D2CA.

The distinction matters because most scaling networks post transaction data back to a base chain while running their own sequencing and fee markets. Under the approach outlined in the memo, the sequencing layer would be assessed on the degree of managerial discretion exercised by its operator rather than on the economics of an associated token alone.

Two attorneys who advise scaling networks, both of whom requested anonymity because their clients are in active correspondence with the agency, said the framing tracks arguments the industry has advanced since 2023. Neither would characterise the memo as a final position.

An SEC spokesperson declined to comment on internal deliberations and said the agency does not confirm the existence of non-public documents.

Any rulemaking would still require a Commission vote and a public comment period, a process that historically takes twelve to eighteen months. In the interim, market participants say the memo is likely to shape how registration questions are negotiated in ongoing enforcement matters.

Legal scholars caution against reading too much into a staff document. "Staff memoranda articulate analytical options, not commitments," said a securities law professor who has testified before Congress on digital asset market structure. "The signal here is that the analysis is getting more granular, which is a change in itself."