An upcoming House Appropriations budget might prevent the SEC from enforcing its controversial Staff Accounting Bulletin 121 (SAB 121) regarding digital assets. FOX Business reporter Eleanor Terrett, reporting on June 4, stated that the bill includes a provision prohibiting the SEC from using allocated funds to implement the rule. Appropriations allow agencies to spend money from the US Treasury for specific purposes.

A policy rider in the budget stipulates:

“The SEC is prohibited from implementing or enforcing Staff Accounting Bulletin No. 121, which imposes burdensome requirements on digital assets.”

The fate of the budget remains uncertain. The Republican-majority House is expected to pass the appropriation bill in a hearing on June 5. However, the Democratic and Independent-majority Senate will need to negotiate its own budget against the House’s.

Terrett noted that Democratic support for an earlier resolution with a similar goal — H.J. Res. 109 — suggests the Senate may retain the rider in the budget.

The bill also aims to allocate $2 billion in funding to the SEC in 2025, lower than the $2.59 billion requested by SEC chair Gary Gensler.

Commissioner Uyeda supports repeal

Terrett also reported that SEC commissioner Mark Uyeda favors rescinding SAB 121, calling it “unfortunate” that President Joe Biden vetoed H.J. Res. 109.

Uyeda criticized the SEC’s introduction of SAB 121 through a regulatory edict, bypassing rulemaking under the Administrative Procedure Act (APA) and undermining checks and balances against an overreaching administrative state.

This critique echoes earlier objections from SEC commissioner Hester Peirce in 2022, who argued that a bulletin was not the appropriate means for such changes. Peirce suggested that the substance of the decision itself might be justified.

Failed attempts to repeal

SAB 121 requires financial institutions and custodians of digital assets to report them on their balance sheets, potentially imposing significant capital and liquidity costs.

Both the House and Senate passed H.J. Res. 109 to overturn the bulletin, with the Senate approving it on May 16.

However, President Biden vetoed the resolution on May 31, citing concerns that it could weaken the SEC and jeopardize consumer and investor protections.

Biden’s decision faced opposition, as House lawmakers, the American Bankers Association, and other groups urged him to sign the resolution into law.