SEC Commissioner Warns Layer-2 Chains with Centralized Sequencers May Face Exchange Registration

SEC Commissioner Hester Peirce has issued a stark warning to layer-2 blockchain projects employing centralized sequencers, suggesting they may need to register as exchanges. Speaking on The Gwart Show, Peirce emphasized the regulatory distinction between truly decentralized protocols and those with centralized control over transaction ordering.

"If you have a matching engine that's controlled by one entity that controls all the pieces of that, then that looks a lot more like an exchange," Peirce stated. The comments highlight growing regulatory scrutiny of layer-2 solutions that centralize transaction sequencing to address MEV concerns, potentially compromising the censorship-resistant nature of blockchain technology.

Peirce drew clear boundaries around decentralized protocols, describing them as "sets of rules that cannot be owned." The SEC appears poised to take a harder line on projects that maintain centralized control points while seeking to preserve regulatory space for genuinely decentralized networks.