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Topline

• AI mega-IPOs could deepen venture capital’s winner-take-most divide

• Signed, sealed, e-delivered

• CLARITY enters its make-or-break phase

• Admin launches AI clearinghouse

• Quick hits

AI mega-IPOs could deepen venture capital’s winner-take-most divide

The next wave of blockbuster technology IPOs may inject long-awaited liquidity into venture capital, but the benefits will not be felt equally. Following SpaceX’s historic ~ $2 trillion public debut, OpenAI and Anthropic have confidentially submitted paperwork in preparation for potential mega-IPOs of their own. To put that scale in perspective, the combined value of the three companies could exceed the total value of all U.S. venture-backed exits since 2000.

According to a recent Reuters analysis, only about 20% of active venture firms own a stake in at least one of the three companies, leaving roughly 3,000 firms outside the largest liquidity events in venture capital history. That disparity matters because venture returns are driven by a relatively small number of outlier investments. The firms holding stakes in the leading AI companies could receive significant distributions, strengthen their performance records, and enter their next fundraising cycles with substantially more capital and a greater competitive advantage. Those that missed out—particularly emerging and smaller managers—will continue to face a difficult fundraising environment after several years of limited exits and capital locked in aging portfolios.

This divide is already visible and growing. U.S. venture firms raised approximately $72 billion during the first half of 2026, nearly equaling the total raised during all of 2025. But the gains have been highly concentrated: Three of the largest venture firms accounted for nearly half of the capital raised during the first half of the year, while five firms accounted for nearly 75% of first-quarter fundraising. Managers with fewer than four funds, meanwhile, accounted for less than 10% of capital raised, down from roughly one-third over the prior decade. At the same time, the average Series A round has increased by more than 60%, giving the largest firms another advantage in competing for the increasingly capital-intensive AI, defense, and hardware companies attracting much of today’s investment.

Why it matters: The return of major IPOs is unquestionably positive for the venture ecosystem. Successful exits generate liquidity for limited partners, employees, and founders and recycle capital into the next generation of companies. But a handful of grand slams cannot, on their own, improve conditions across the broader venture market. If liquidity and fundraising remain concentrated among a small group of established managers, promising startups outside their networks—and emerging managers who often back overlooked founders, industries, and regions—could face an increasingly narrow path to capital. 

A healthy innovation economy requires not only bigger exits at the top, but also a deeper, more competitive capital formation ecosystem underneath them. The solution is not to constrain companies capable of achieving extraordinary scale. It is to create more pathways for more companies and investors to access capital and participate in the growth cycle. The bipartisan INVEST Act, together with the SEC’s efforts to encourage more companies to enter the public markets, represents an important step in that direction.

Tick-tock: The House passed the INVEST Act in December by a strong bipartisan vote of 302–123, and many of its underlying provisions like the DEAL Act have previously passed the House with overwhelming or unanimous support. But the Senate has yet to take up the House legislation or consider a comparable package of its own—and the legislative window is narrowing before the midterm elections.

Carta and our ecosystem partners have worked for years to advance policies that expand access to capital, support emerging fund managers, and help more companies scale and ultimately enter the public markets. We will continue fighting the good fight in Washington, but as Rep. Bill Huizenga emphasized during Carta’s latest policy webinar, you—members of the ecosystem—are the most effective advocates for why these policies matter.

Reach out to your network, post on social channels, and contact your senators. Let them know how passing the INVEST Act would help broaden access to capital, strengthen the innovation economy, and ensure that the next generation of category-defining companies can emerge from more firms, founders, industries, and regions.

Signed, sealed, e-delivered

The SEC proposed Regulation E-Delivery this week, which, if adopted, would make electronic delivery—not paper—the default for disclosures under the federal securities laws. Companies, broker-dealers, investment advisers, funds, and other regulated entities could deliver information electronically without first obtaining affirmative consent, and would apply broadly to documents, including prospectuses, proxy material, and Form CRS disclosures.

Why it matters: The significance of this shift goes beyond printing and postage. As Commissioner Hester Peirce noted, the bigger opportunity is what comes next. Moving from a paper-based to digital-first framework could create room for interactive dashboards, streaming video, mobile-optimized summaries, which could help facilitate disclosures that are more timely, searchable, accessible, and personalized. The proposal preserves investor choice, enabling paper opt-ins and additional protections for documents containing personal financial information. 

Admin launches AI clearinghouse

The Trump administration launched Gold Eagle on July 14, creating a public-private clearinghouse to coordinate the discovery, validation, and remediation of software vulnerabilities identified using advanced AI models. Led by the Treasury Department in partnership with CISA and the Pentagon, the initiative stems from the president’s June 2 executive order and is designed to prevent AI companies and cybersecurity researchers from duplicating vulnerability scans while helping critical infrastructure operators prioritize and patch the most consequential flaws. Gold Eagle has already begun accepting and triaging vulnerability reports, with a particular focus on open-source software that underpins financial institutions, hospitals, utilities, and other critical systems.

The clearinghouse is the most concrete institutional product yet of the June 2 executive order, but it is only one piece of the administration’s emerging AI security framework. Separate provisions direct the government to develop classified benchmarks for determining which systems qualify as “covered frontier models” and establish a formally voluntary process through which developers can provide the government access to those models for up to 30 days before broader release. The order expressly disclaims mandatory licensing or preclearance, but recent interventions in frontier model deployment illustrate why industry remains focused on how that distinction operates in practice.

Why it matters: Gold Eagle addresses a well-defined coordination problem where the interests of government, industry, and critical infrastructure operators are reasonably well aligned. The clearinghouse could reduce duplicative work, improve vulnerability disclosures, and accelerate patching—particularly for open-source projects that may lack the resources to respond to a growing volume of AI-generated findings. Its launch also signals that federal AI oversight is moving rapidly from policy statements to operational infrastructure. The key questions now are how participation and vulnerability prioritization will work, what protections will apply to proprietary information, and how the clearinghouse will interact with the government’s separate classified benchmarking and pre-release review process, whose standards have yet to be made public.

For developers and investors, the central issue is no longer whether Washington will play a role in frontier model deployment—it already does. It is whether that role evolves into a predictable framework with clear standards and procedural guardrails, or remains a nominally voluntary process in which companies must negotiate government approval model by model.

Trump intervenes as CLARITY Act enters make-or-break stretch

The White House made a renewed push to salvage the CLARITY Act this week, with President Trump meeting Republican senators Thursday to address the ethics dispute now threatening the crypto market-structure bill. Democrats have insisted that the final legislation restrict the president, vice president, members of Congress, and other senior officials from maintaining personal crypto interests—an issue that has become increasingly politically charged following Trump’s disclosure of more than $1 billion in crypto-related income last year.

The dispute is delaying the release of a nearly final Senate package combining the separate bills advanced by the Banking and Agriculture committees. The merged text reportedly adds stronger consumer protections and responds to several Democratic concerns, but negotiators have yet to resolve ethics restrictions, federal preemption, or the process for filling Democratic vacancies at the SEC and CFTC. Of those issues, ethics has become the most immediate obstacle to securing the Democratic votes needed for floor action. The Senate Banking Committee advanced its version 15–9 in May, with Democrats Ruben Gallego and Angela Alsobrooks joining Republicans after lawmakers reached a compromise over stablecoin rewards. Both warned, however, that they might not support the final legislation unless it includes stronger ethics protections.

Why it matters: The CLARITY Act could establish the first durable federal framework for digital-asset fundraising, trading, and tokenized financial infrastructure, clarifying the line between securities and commodities while giving startups a more predictable pathway to issue tokens and build blockchain-based products in the United States. But after lawmakers largely navigated the substantive fight between banks and crypto companies over stablecoin rewards, the bill’s fate may now depend on whether the president is willing to accept restrictions on his own financial interests.

What’s next: Senate Majority Leader John Thune has said he intends to press forward later this month, but the legislative window is rapidly closing. The bill needs 60 votes to advance, meaning Gallego, Alsobrooks, and several additional Democrats will be essential. Further complicating the final push, Patrick Witt—the White House’s lead crypto negotiator—is scheduled to begin a months-long military leave later this month. Without an ethics compromise soon, years of bipartisan market-structure negotiations could collapse, leaving the SEC and CFTC to establish the rules of the road through regulatory action rather than legislation.

Quick hits

• Private-equity firms are sitting on a nine-year backlog. U.S. private equity firms are holding roughly 13,500 unsold portfolio companies. At the current pace of exits, PwC estimates it would take nine years to clear the backlog. Nearly 4,000 companies have been held for at least six years, and roughly 1,500 for nine years or longer, well beyond the traditional three-to-five-year investment horizon. The logjam is particularly acute in software, where firms deployed significant capital at peak valuations in 2020 and 2021 and are now confronting uncertainty over whether AI will strengthen, disrupt, or replace the business models underlying those investments.

• New York enacts nation’s first statewide moratorium on data centers. Gov. Kathy Hochul signed an executive order this week placing a one-year moratorium on permits for hyperscale data centers, making New York the first state to enact such a pause. The move is notable coming from a pro-business governor who has otherwise championed AI investment and the use of AI in government. It also illustrates how quickly data-center development is becoming an affordability and political issue. Data-center operators, business groups, and some labor leaders warn that the pause will drive jobs and investment elsewhere, while progressives and local communities are pushing for stronger protections against higher electricity bills and pressure on water and energy infrastructure. The latter sentiment is increasing. New York could provide a template for other states and localities to follow—a development that is rapidly becoming a material infrastructure risk for AI companies and their investors. 

• Warsh signals broad Fed reset in first congressional testimony. In his first appearance before Congress since taking the reins in May, Fed Chair Kevin Warsh paired a firm stance on inflation with an ambitious plan to rethink how the central bank operates. Warsh declined to telegraph the Fed’s next interest-rate decision and cautioned that one encouraging inflation report did not mean the fight was over. Beyond monetary policy, Warsh previewed a growth-oriented overhaul of bank regulation, calling for more tailored supervision, modernized regulatory thresholds, and a Basel capital framework designed around U.S. competitiveness. AI also emerged as both an economic engine and a potential source of systemic risk. Warsh highlighted the extraordinary scale of data-center investment while supporting broader access to frontier models to help financial institutions identify cyber vulnerabilities. He pledged to keep political considerations out of access to Federal Reserve payment systems and said the Fed should seek to prevent—not backstop—future runs involving stablecoins or other digital assets. 

• Mercurial and magnetic, Lindsey Graham was a force in the Senate. Sen. Lindsey Graham (R-SC) died Saturday night after suffering an aortic dissection, stunning Washington as Congress returned from recess. More than a reliable Republican vote, Graham was one of the few lawmakers consistently at the center of nearly every major legislative negotiation,working across the aisle on issues including immigration, criminal justice, spending, national security, and sanctions. He also occupied a rare position in the Trump-era Republican Party: a Senate institutionalist with deep Democratic relationships who retained the president’s ear and could serve as a bridge among the White House, Congress, and U.S. allies abroad. His death leaves the chamber without one of its most experienced legislative brokers as Republicans confront another potential reconciliation package, unresolved spending bills, contentious confirmations, and major foreign policy decisions. 
  
  South Carolina Gov. Henry McMaster appointed Graham's sister, Darline Graham Nordone, to serve out his term through January 3, 2027. A special Republican primary next month will determine the party’s nominee for the November election.

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Topline

• SEC releases 2026 regulatory agenda with focus on crypto and bolstering public and private markets 

• SCOTUS curtails agency independence, reshaping the future of financial regulation

• U.S. lifts export restrictions on Anthropic models as frontier AI review regime takes shape

• Quick hits

SEC releases 2026 regulatory agenda with focus on crypto and bolstering public and private markets 

The SEC released its 2026 regulatory agenda this week, providing the clearest roadmap yet for Chairman Paul Atkins’s priorities to expand access to private markets, reduce friction for companies to go and stay public, and create durable rules of the road for crypto and tokenized securities. The agenda includes dozens of anticipated rulemakings that reflect Atkins’s broader philosophy: The SEC should provide a clear, durable framework that allows capital to flow, companies to grow, and investors to make informed decisions, not a regulatory structure that controls outcomes or suffocates innovation.

Expanding private market access. A major focus of the agenda is expanding retail access to private markets. Atkins has made clear that fewer public companies mean fewer opportunities for ordinary investors to participate in the growth of the next generation of American enterprise. If more value creation is happening while companies remain private, then the regulatory framework has to account for how investors can responsibly access that growth. The SEC has already taken steps to allow registered fund vehicles to provide broader exposure to private funds, and the agenda suggests the Commission is now looking to formalize and expand that framework through a dedicated rulemaking. The agenda also tees up updates to exempt offering pathways, including potential changes to the accredited investor definition, and a long-awaited proposal on finders—an issue the startup ecosystem has raised for years as a way to help issuers connect with investors without forcing all intermediaries into full broker-dealer registration.

Reducing burdens on private fund advisers. The agenda anticipates reforms that could reduce compliance burdens on private fund advisers. The SEC and CFTC have already proposed significant changes to Form PF, including raising the filing threshold from $150 million to $1 billion in private fund AUM and eliminating certain quarterly event reporting and current reporting requirements—changes that would eliminate filing obligations for almost half of advisers currently required to file, while still preserving visibility into more than 90% of reported private fund gross asset value. The agenda also previews potential changes to pay-to-play restrictions, which could reduce compliance exposure for advisers raising from public pension LPs; adviser recordkeeping requirements for electronic communications; and the custody rule. On custody, the agenda’s primary focus is modernizing the framework for digital assets, but any reopening of the rules could create an opportunity to address persistent private fund pain points, including the treatment of co-investment SPVs and other holding structures that can trigger separate audit and compliance obligations under current guidance.

Revamping public markets. The agenda continues Atkins’s “Make IPOs Great Again” push. Several public company reforms are already moving, including disclosure modernization, semiannual reporting, EGC accommodations, filer-status simplification, and registered offering reform—all designed to reduce the cost of being public and make the public markets more attractive and sustainable once companies arrive there. The agenda also includes anticipated Rule 144 safe harbor amendments, which could have direct implications for secondary liquidity by easing resale constraints on restricted and control securities and improving the pre-IPO resale pipeline. Taken together, these reforms connect the full company lifecycle: private capital formation, secondary liquidity, IPO readiness, and the cost of remaining public.

Crypto clarity. The agenda reflects the SEC’s continued focus on crypto, underscoring the agency’s broader posture that blockchain is becoming market infrastructure, not just an asset class. The Commission is expected to formalize what it has largely been delivering through staff guidance, no-action letters, and enforcement restraint—a rules-based framework for crypto capital raising, custody, trading, and tokenized securities. That matters because rulemaking gives market participants more durable legal authority than interpretive guidance, particularly as progress on the CLARITY Act remains uncertain in the Senate. 

What’s not included: AML and AI? The most recent agenda does not include a previously referenced joint customer identification program rulemaking with FinCEN, which is consistent with Treasury’s decision to delay the related adviser AML/CFT investment adviser rule until January 2028. That does not mean adviser AML obligations are off the table, but it does suggest the policy direction is shifting from near-term implementation to reconsideration of scope, timing, and operational burden.

The agenda is notably silent on AI, even as it is reshaping how firms communicate with investors, provide advice, automate compliance, detect fraud, and manage cyber risk, yet there is no reference to the disruptive technology on the agenda. Part of that may be timing, as the regulatory roadmap is often finalized months before release—and the regulatory scrutiny has notably intensified over the past few months. But it could also signal a deliberate choice. Rather than regulate AI as a separate product category, the SEC may be more inclined to address its use through existing obligations around fiduciary duty, conflicts, supervision, books and records, cybersecurity, disclosure, and anti-fraud authority. Either way, policymakers will face increasing pressure to answer downstream questions around cyber-enabled market abuse, automated advice, model governance, vendor risk, and the use of AI agents in trading and compliance—questions the SEC will eventually have to answer.

Why it matters: We are at an inflection point where policy and innovation are converging to reshape the infrastructure of capital markets. The Atkins SEC is trying to rebuild the capital markets framework around innovation, access, and U.S. competitiveness. The boundaries between public and private markets are blurring, new investor classes are gaining access, and technology is changing the infrastructure on which they operate. This is a real opportunity to shape the future of private capital in a way that not only bolsters the ecosystem but also broadens it in a more responsible and sustainable manner. 

SCOTUS curtails agency independence, reshaping the future of financial regulation

On June 29, the Supreme Court issued one of its most consequential administrative law decisions in decades. In Trump v. Slaughter, the Court ruled 6-3 that presidents may remove commissioners at independent federal agencies—including the SEC, CFTC, and FTC—without cause, overturning the nearly century-old Humphrey’s Executor precedent that had insulated those officials from at-will presidential removal. The decision fundamentally reshapes the balance of power between the White House and independent regulators, making clear that agencies exercising executive authority are ultimately accountable to the President.

The lone exception: the Federal Reserve. In a separate 5-4 decision, the Court preserved the Fed's removal protections based on its unique historical role in monetary policy and the national economy.

Background: The case arose after President Trump removed Democratic FTC Commissioners Rebecca Kelly Slaughter and Alvaro Bedoya in March 2025 because their continued service was “inconsistent with his Administration’s priorities.” Slaughter challenged her dismissal, arguing that the FTC Act permits removal only for “inefficiency, neglect of duty, or malfeasance in office,” consistent with Humphrey’s Executor. Although she initially prevailed in the lower courts, the Supreme Court held that those statutory removal protections are unconstitutional because FTC commissioners exercise executive power and therefore must remain accountable to the President. In doing so, the Court rejected the constitutional foundation that has supported the independence of many multi-member regulatory commissions like the SEC for more than 90 years.

Why it matters: Financial regulation is increasingly made through agency rulemaking, guidance, and enforcement rather than congressional legislation. Although SEC chairs have always established the Commission’s policy agenda, Congress intentionally designed independent commissions with bipartisan membership and staggered five-year terms to provide continuity and regulatory stability across administrations. Slaughter changes that dynamic. The president now has greater influence over both the composition and policy direction of independent agencies, increasing the likelihood that regulators move more quickly—and more uniformly—to implement an administration’s priorities.

As a result, policy may become more politically responsive, but also more susceptible to change every four years.

For private markets, the practical implications are significant. An administration seeking to expand capital formation, modernize exempt offerings, broaden retail access to private markets, or accelerate crypto regulation may now have greater ability to ensure agency leadership executes that agenda without internal resistance. Bipartisan commissions may be a thing of the past. But the same is true in the opposite direction. Future administrations could rapidly reverse course on those same priorities, making regulatory policy more responsive to elections but less durable over time. 

The practical consequence is that lasting policy changes may increasingly require congressional action rather than agency rulemaking alone. Market participants that have looked to regulators to deliver durable reforms may find that those reforms are only as stable as the administration that adopted them.

Bottom line: Together with Loper Bright and the Court’s broader effort to narrow agency authority, Slaughter continues the Roberts Court's broader project of reshaping the administrative state. The decision doesn’t simply affect who leads federal agencies; it changes how durable financial regulation will be. Presidential elections will carry greater weight, agency independence will play a smaller role, and long-term regulatory certainty will increasingly depend on Congress rather than administrative discretion.

This is why getting the INVEST Act across the finish line is so critical—and why continued ecosystem engagement is so critical.

U.S. lifts export restrictions on Anthropic models as frontier AI review regime takes shape

The administration lifted export controls on Anthropic's Claude Mythos 5 and Fable 5 on June 30, ending a nearly three-week shutdown triggered by national security concerns over Fable 5’s cybersecurity capabilities. Redeployment followed additional safety review and a commitment from Anthropic to proactively address security risks, work with the government on evaluation standards for future models, and flag malicious activity—terms that track directly with the company’s posture that frontier AI companies need clearer, more predictable rules around model security. Commerce Secretary Lutnick separately authorized Mythos 5 access for a select group of critical infrastructure operators and federal agencies ahead of the full lift, establishing a tiered redeployment structure that previews what a formal trusted-partner regime may look like in practice.

OpenAI followed a similar path with GPT-5.6, launching to roughly 20 government-vetted partners on June 26 at the administration's request before broader availability on July 9.  OpenAI was unambiguous that it viewed the arrangement as a one-time accommodation, not a template for a government access process to become the long-term default.

Why it matters: Together, the Anthropic and OpenAI episodes suggest the June 2 executive order's nominally voluntary security certification process—which the order itself expressly disclaims as any form of mandatory licensing or preclearance—may already be functioning as the de facto launch pathway for the most capable models. Both cases ran on ad hoc government pressure well ahead of the August 1 deadline by which NSA and the multi-agency group must publish the classified benchmarking criteria and formal framework rules that would actually define what a “covered frontier model” is and what review entails. Frontier AI regulation is being written in real time, largely through case-by-case engagement with the leading private labs, and the gap between voluntary framing and operational reality is significant..

For investors and end-users, model capability is no longer the only variable: launch timing, access restrictions, and compliance exposure now factor into product and investment calculus. The administration’s de facto review regime is itself the strongest argument for what industry has been pushing for: a transparent, risk-based framework with clear criteria, defined timelines, and predictable outcomes. An ad hoc review process that delays or restricts U.S. model access abroad does not just create domestic compliance uncertainty; it risks ceding ground in the global race to define the AI market.

Quick hits

• Illinois enacts its own AI safety law as Congress struggles to advance federal framework. Illinois Governor JB Pritzker signed the Artificial Intelligence Safety Measures (SB 315) into law this week, making Illinois the first state to require independent third-party safety audits of AI systems before deployment. The law was backed by both OpenAI and Anthropic, which are also navigating the federal government’s voluntary certification framework established by the June 2 Executive Order. Illinois joins a growing patchwork of state AI regulation, following California’s SB 53 and New York’s RAISE Act. At the same time, the Trump administration continues to push for federal preemption of state AI laws, arguing that a fragmented regulatory landscape will undermine U.S. competitiveness. But as Congress struggles to establish a durable federal framework, states are moving ahead. For AI developers operating nationwide, compliance is becoming increasingly complex, while the case for federal preemption grows more difficult as state regimes become more entrenched.

• Treasury to accept public stock donations for Trump Accounts. The Treasury Department announced it will accept donations of publicly traded stock to fund the new Trump Accounts, expanding the types of assets that can be used to seed the tax-advantaged children's investment accounts launched on July 4. The structure allows donors to contribute appreciated shares without triggering capital gains tax, creating a potentially attractive vehicle for founders and other large equity holders. Treasury officials expect the change to encourage significantly more private contributions, with high-profile donors already pledging stock. The details, however, remain unresolved. Treasury has yet to explain how individual stock donations will work within a program that, by statute, invests in mutual funds and ETFs, leaving open questions around valuation, liquidation, eligibility, and administration. 

Carta’s take: Beyond Trump Accounts, the initiative could expand the use of stock as a mainstream funding mechanism for long-term savings. Developing the operational and tax  infrastructure could bolster broader efforts to modernize retirement and wealth-building policy—including proposals to allow private company equity and other appreciated assets to be contributed directly into tax-advantaged retirement accounts. The result would be a shift toward treating equity ownership itself, rather than cash alone, as a core building block of long-term wealth accumulation.

• Federal Reserve proposes updates to its anti-money laundering rules. On July 7, the Federal Reserve proposed amendments to its anti-money laundering and countering the financing of terrorism requirements for banks, aligning its standards with rules already proposed in April by FinCEN, the OCC, the FDIC, and the NCUA. The core shift is risk-based: Rather than applying compliance resources uniformly, banks would be required to concentrate AML/CFT programs on “higher-risk customers and activities.” Critically, the proposal raises the bar for Fed enforcement, limiting formal AML actions to only “significant or systemic” program failures—a threshold with no defined floor, meaning that banks could contest whether incremental compliance failures clear the bar before the Fed can formally act. Fed Governor Michael Barr dissented against this ambiguity, warning that the new standard is undefined and could limit the Board’s ability to hold banks accountable. The comment period will be open for 60 days.

• Fed’s Warsh names leadership for five new task forces. On July 9, Fed Chair Kevin Warsh announced the membership of five external task forces charged with recommending operational reforms to the central bank. The task forces draw on a roster of figures who have shaped modern technology, economic research, and global monetary policy, including VC Marc Andreessen, who is tasked with evaluating how AI and emerging technologies will reshape employment, productivity, and economic growth as head of the productivity and jobs panel. This mandate is not incidental: How the Fed models AI’s productivity impact directly shapes its assumptions about inflation and appropriate interest rate levels. While major institutional changes require FOMC consensus, the composition of these panels suggests that Warsh is serious about bringing outside perspectives into this expanding regulatory landscape.

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Topline

• SEC turns its eye toward PE continuation vehicles

• Anthropic export controls could shape the future of AI regulation 

• House Democrats press SEC on consumer-facing AI trading agents

• Industry seeks to head off standalone private credit reporting

• Quick hits

SEC turns its eye toward PE continuation vehicles

The SEC is reportedly examining private fund continuation vehicles, scrutinizing a structure that has boomed as exits have slowed and private equity managers sit on a growing backlog of unsold portfolio companies. Continuation vehicles allow managers to move assets from older funds into newly created vehicles, giving existing investors a liquidity option while extending the holding period for assets that may be difficult to sell in a sluggish exit environment. These structures give managers more time to hold companies while returning capital to investors without forcing a sale at a depressed valuation, selling to a competitor, or realizing potential losses under current market conditions.

Continuation vehicles have become an important pressure valve for private equity. But the same features that make continuation vehicles useful have also made them a regulatory flashpoint. CVs are inherently conflicted because managers are often on both sides of the transaction: selling assets out of an existing fund while continuing to manage them in a new vehicle. Instead of pursuing new requirements as the now-vacated private fund advisers rule sought to do with mandatory fairness opinions, the agency is relying on existing fiduciary obligations, disclosure standards, and anti-fraud authority to test whether fund managers can justify how these transactions are structured, priced, and disclosed. 

Why it matters: Much of the public framing around the SEC’s private market scrutiny has been directed toward private credit and retailization, including the risks that arise as illiquid private fund strategies reach retirement plans, interval funds, and other products marketed to individual investors. The recent attention on continuation vehicles shows that the SEC’s heightened regulatory focus extends beyond retail-facing products (as we have previously highlighted) and into institutional market structures that have become central to how private equity manages liquidity. This aligns with the agency’s 2026 exam priorities, which flagged valuation, fees, conflicts, and differential investor treatment across private fund structures as areas of focus.

The practical takeaway: Process matters. As scrutiny rises, fund managers will need to show that continuation vehicle transactions are well-governed, well-documented, supported by credible third-party valuation work, and defensible as fair to investors cashing out, rolling over, or buying into the fund. 

Anthropic export controls could shape the future of AI regulation

The Trump administration’s intervention in Anthropic’s Fable 5 and Mythos 5—and now OpenAI’s GPT-5.6 rollout—is quickly becoming a test case for the next phase of AI regulation. The immediate story is about a disputed jailbreak, a Commerce Department directive, and a restricted model launch. The bigger story is that Washington appears to be moving from abstract debates over frontier AI oversight toward a government-mediated launch regime for the most advanced models.

What happened: Anthropic launched Claude Fable 5 and Claude Mythos 5 on June 9. Fable 5 was made broadly available, while Mythos 5 was released through a narrower access program focused on advanced cybersecurity users. Three days later, the Commerce Department directed Anthropic to suspend access to both models by foreign nationals, including foreign-national employees inside the United States. Because Anthropic could not reliably screen all users by nationality in real time, the company took the models offline more broadly.

The directive followed concerns that Fable’s safeguards could be bypassed in ways that exposed cyber-related capabilities associated with Mythos. Anthropic has pushed back, arguing that the reported jailbreak was narrow, non-universal, and not meaningfully different from vulnerabilities that affect other advanced models not subject to similar controls. That distinction matters. If the standard is that a frontier model must be immune from all jailbreaks before release, no major model is likely to satisfy it. If the standard is tied to measurable capability thresholds, mitigation practices, access controls, monitoring, and response plans, developers and regulators have a clearer basis for decision-making. Two weeks later, the models remain offline as the two sides have yet to reach a resolution.

EO tension and legal uncertainty: The episode exposes a central tension in the administration’s AI policy. Earlier this month, the White House issued an executive order creating a voluntary 30-day pre-release review process for advanced AI models, while expressly disclaiming any mandatory licensing, preclearance, or permitting regime. But the Anthropic directive shows how voluntary review, export control authority, and national security concerns can quickly converge into something that looks like de facto launch approval.

A voluntary review process may remain voluntary on paper, but once the government demonstrates it can pull a model from market days after release, pre-release engagement starts to look less optional. Developers may conclude that documented review, government testing, and a clear mitigation record are not merely good safety practices; they are market-access protection. That dynamic is already beginning to shape launch strategy across the frontier AI ecosystem, as companies weigh whether to stagger releases, limit access to approved customers, or seek more explicit federal engagement before broad deployment. This is apparent with OpenAI’s forthcoming GPT-5.6 model, which will initially be available only to a small group of U.S. companies and organizations approved by the administration. The company reportedly did not plan to restrict the general-use model, but shifted to a controlled release after White House engagement.

The legal hook is also unsettled. Export controls traditionally focus on sensitive technology, technical data, software, source code, chips, computer infrastructure, and transfers to foreign parties. Hosted model access is different. Users may receive outputs, but not the underlying model weights or source code. That raises a threshold question of when does access to an AI service become an export of controlled technology. Separately, Legion LegalTech sued the government after losing access to the models, arguing that the restriction exceeds Commerce’s authority because hosted model access is not the same as transferring software, source code, or model weights.

Congressional action: In response, a bipartisan group of House lawmakers sent Commerce Secretary Howard Lutnick a letter demanding the legal basis, technical evidence, evidentiary threshold, and restoration criteria behind the Anthropic directive. 

Congress is unlikely to resolve the broader AI debate quickly, but the lack of clear standards and increasing concern around advanced models have created more urgency for legislative action. The episode shows the danger of regulating frontier AI through opaque directives instead of clear statutes, transparent standards, and defined appeal rights.

Why it matters: This is the beginning of a new AI regulatory perimeter. The debate is no longer just whether Washington should regulate frontier models; the question is how. 

For end users, AI dependency is now a policy, compliance, and operational risk issue. Companies using frontier models for software development, cybersecurity, legal work, financial analysis, valuation, portfolio monitoring, or customer workflows should assume that access to specific models can change quickly based on national-security determinations, vendor controls, or government review. The firms best positioned for it will treat model governance like vendor risk management and build compliance processes that can adapt as federal standards evolve.

House Democrats press SEC on consumer-facing AI trading agents

House Financial Services Committee Democrats sent a letter to SEC Chairman Paul Atkins on agentic AI retail trading, specifically asking what oversight, guidance, and investor protections are in place as brokerage firms begin allowing AI agents to make autonomous trades on behalf of retail investors—and whether existing securities laws are sufficient or Congress needs to act. Third-party AI agents are beginning to operate inside registered retail platforms, while platform disclosures often warn that the tools carry significant risk and may not be controlled, supervised, monitored, recommended, or audited by the brokerage. Democrats argue that disclaimers alone do not resolve the allocation of legal responsibility among broker-dealers, AI developers, and retail investors when AI agents make or enable consequential investment decisions in retail accounts.

The inquiry goes directly to the regulatory perimeter. The lawmakers ask when an AI agent or developer would need to register as a broker, dealer, investment adviser, or associated person; how third-party AI agents affect broker-dealer obligations under Regulation Best Interest (Reg BI), supervision, books and records, best execution, privacy, cybersecurity, and order-handling rules; and whether AI developers bear liability when their tools facilitate autonomous retail trading. They also press the SEC on market-structure risks, including herding, volatility, hallucinated or manipulated information, prompt-injection attacks, social media rumors, and misuse of customer trading data.

Why it matters: As agentic AI becomes more embedded in financial services, calls for regulatory clarity will only increase. Financial markets are built on regulatory frameworks that assume identifiable actors at each consequential step: the adviser who recommends, the broker who executes, the intermediary that supervises, and the firm that bears legal responsibility. Agentic AI complicates that structure by inserting software that can analyze, recommend, and execute with limited or no human involvement. Reg BI, the Investment Advisers Act, and broker-dealer registration rules were not written with autonomous retail trading agents in mind. The SEC’s response will be an early test of whether existing law can stretch to cover agentic finance, or whether Congress will need to define new rules for AI systems operating inside regulated markets.

Industry seeks to head off standalone private credit reporting

A coalition of major private credit trade groups is urging the SEC and CFTC not to build a standalone private credit reporting regime into Form PF. In a joint letter, the industry argued that existing Form PF requirements already capture the core data regulators need to monitor private credit funds, including leverage, credit quality, counterparty interconnections, investor liquidity, and portfolio composition. Rather than create a new private credit-specific reporting architecture, the groups are pressing for targeted enhancements to existing Form PF sections, including modest additions around borrower defaults, weighted average loan life, concentration in top positions, and industry exposure.

Why it matters: Private credit remains squarely in regulators’ line of sight, but the debate is shifting from whether the market should be monitored to how granular, standardized, and costly that monitoring should be. The industry contends that regulators can get better visibility into leverage, liquidity, credit quality, and concentration without forcing advisers to build a duplicative compliance infrastructure for a market that policymakers have said does not currently present systemic risk concerns. The SEC is unlikely to abandon private credit monitoring altogether, but it may be receptive to the argument that the final rule should refine Form PF rather than create a wholesale private-credit reporting overhaul.

The bottom line: The direction of travel is more standardized visibility into private credit risk, but likely through targeted Form PF refinement instead of a standalone regime.

Quick hits

• House and Senate advance bipartisan housing bill. Congress sent a bipartisan housing reform bill to the president’s desk after months of negotiation and revision, clearing one of the Senate’s major financial services priorities from the calendar. The development is significant in its own right, but it also improves the scheduling posture for the INVEST Act—the capital formation package that passed the House in December and has been awaiting Senate consideration. With housing off the table, Senate Banking has more bandwidth to turn to other priorities, including capital formation, though crypto market structure remains ahead of INVEST in the queue. The bigger constraint is time: the legislative window is narrowing quickly before August recess and the midterm sprint this fall.
  

• Trump seeks to boost quantum computing with new executive orders. President Trump signed two executive orders on quantum technology, pairing an industrial-policy push to win the quantum race with a faster transition to quantum-resistant cybersecurity. The first order establishes a whole-of-government strategy for quantum information science and technology, including a new effort to deliver a scientific-scale quantum computer to a Department of Energy facility, strengthen domestic supply chains and workforce pipelines, protect sensitive technology from adversaries, and accelerate quantum sensing and networking. The companion order is the more immediate compliance signal. It directs federal agencies to migrate high-value and high-impact systems to NIST-approved post-quantum cryptography for key establishment by the end of 2030 and digital signatures by the end of 2031, while helping critical infrastructure operators plan their own transitions. The point is not that quantum computers will break encryption tomorrow, but that sensitive data stolen today may still be valuable when quantum decryption becomes possible later. For financial firms and private market participants, the EO is a signal to begin inventorying cryptographic systems, reviewing vendor exposure, and building post-quantum migration plans now.

• Trump kills plan to quickly confirm new intelligence chief. Former SEC Chairman Jay Clayton’s path to director of national intelligence hit an unexpected obstacle after President Trump canceled his Senate Intelligence Committee hearing hours before it was set to begin, saying the nomination would not move forward until James McDonald is confirmed to replace Clayton as U.S. attorney for the Southern District of New York. Bill Pulte, whose acting DNI appointment had already triggered Democratic opposition and complicated FISA reauthorization talks, will remain in the role for now—and he’s already making significant changes while in the role, which could further complicate the confirmation process. With FISA lapsed and no confirmed intelligence chief, the prolonged stalling carries real national security costs and further complicates the Senate’s ability to move on other legislative priorities.

• Bessent and Lutnick clash over government AI stakes as industry pushes back. Senior Trump administration officials are debating whether, and how, the federal government should acquire equity stakes in major AI companies, with Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick on opposing sides. While Bessent champions directing any AI equity toward Trump Accounts, Lutnick favors a sovereign wealth fund structure. No decision has been made, and industry reception has been cold. Some in the industry have publicly rejected the concept, and policymakers have expressed skepticism. Structural problems abound, as most major AI companies don't pay dividends, meaning any government stake would appreciate on paper with no clear return mechanism. Deeper concerns around regulatory capture persist as well: A government holding a financial position in Anthropic or OpenAI would have a built-in incentive to soften safety oversight. 

• Newsom calls for national billionaire tax while fighting California wealth tax measure: This morning, California Gov. Gavin Newsom unveiled a national wealth tax agenda framed as an "economic reset for America"—and a signal of a 2028 presidential run. The proposal would impose a minimum tax on anyone with a net worth above $100 million, restrict the practice of borrowing against appreciated assets as an alternative to realizing taxable income, tighten inheritance rules, raise corporate taxes to pre-Trump levels, and create a national public equity fund giving Americans a stake in the AI industry. The timing is pointed: Newsom rolled out the agenda one day after a California SEIU-backed ballot initiative imposing a state-level billionaire wealth tax qualified for the 2026 ballot—a measure he opposes, arguing that wealth is mobile and the fight belongs at the federal level. Newsom argues that distinction matters: wealth is mobile, and a state-level tax can be avoided by relocating, while a federal minimum tax cannot. The proposal isn’t expected to advance under the current Congress, but it adds another data point to the growing bipartisan pressure around AI equity and wealth concentration—and gives Newsom a platform to run on.

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Topline

• Peirce’s parting wisdom on the future of SEC regulation

• Carta Policy participates in U.S. Chamber’s Capital Markets Summit: The Future of American Capital

• Frontier AI oversight debate takes shape

• CFTC proposes federal framework for prediction markets

• Lack of clarity on path forward for crypto market structure

• Quick hits

SEC Commissioner Peirce makes the case for regulatory restraint

In one of her final speeches as an SEC Commissioner (an absolute must-read), Hester Peirce offered a parting regulatory philosophy and roadmap for the agency’s next chapter. Speaking at the U.S. Chamber’s Capital Markets Summit, Peirce argued that U.S. capital markets work best when the government acts as a referee, not a market participant. Enforce sensible rules fairly, but resist the temptation to steer capital, impose merit-based judgments, or stretch old statutes to reach new policy objectives beyond the agency’s core investor-protection and capital-formation mandates.

For private markets, Peirce pointed to the proposed Form PF rollbacks as an example of correcting a private fund reporting regime that had grown beyond its original purpose. She also flagged the investment adviser pay-to-play rule, questioning whether restrictions that can limit an adviser’s ability to receive compensation after certain political contributions are constitutionally sound or within the SEC’s proper remit. This matters for private fund advisers raising from public pensions and other government LPs, where political contribution compliance can affect fundraising and investor relationships. Peirce also criticized expansive uses of Section 206(4) of the Advisers Act, including negligence-based theories, reinforcing a broader message that prophylactic adviser rules should be tied more clearly to fraud, investor harm, and congressional authorization.

Why it matters: Peirce’s speech offers a roadmap for where the SEC may continue to unwind or narrow private-market regulation under Chairman Atkins. Form PF rollbacks are already underway, but Peirce’s comments suggest the next wave could focus on adviser rules that impose broad compliance burdens without a clear showing of fraud, investor harm, or congressional authorization. For private fund advisers, that could mean a more favorable posture on reporting, fundraising, enforcement remedies, and political contribution compliance—especially for firms raising from public pensions.

Carta participates in U.S. Chamber’s Capital Markets Summit: The Future of American Capital

On Tuesday, Carta’s Head of Policy Holli Heiles Pandol joined policymakers and market participants for a discussion on the future of American capital at the U.S. Chamber of Commerce Capital Markets Summit. The panel focused on why companies are staying private longer, what that means for investors and employees, and how policy can reduce the regulatory frictions associated with going—and staying—public.

Key takeaways:

• The cost of being public has continued to rise. Public companies face greater regulatory complexity, compliance expense, and litigation exposure, while quarterly reporting pressures can punish management teams for investing through longer-term growth cycles. Private markets, by contrast, often give companies more flexibility to scale before entering the public markets.

• Private capital has also matured as an alternative. Secondary transactions, tender offers, and other liquidity tools now provide meaningful opportunities for employees and early investors without requiring an IPO. For many companies, going public remains an important aspiration, but it is no longer the only path to scale.

• The policy environment is beginning to respond. The SEC is taking steps to meaningfully address barriers for companies to go—and stay—public. There is growing momentum behind reforms that would make the public markets more attractive, including extended disclosure accommodations, a new IPO on-ramp, and reforms that would shield smaller public companies from accelerated filer status as they transition into life as public companies.

• Companies raise capital on a continuum, and policy should support them at every stage of that journey, including formation and growth in the private markets, liquidity, employee ownership, and, when the time is right, a successful transition to the public markets. As access to private markets expands and innovation continues to reshape how companies finance growth, the traditional distinction between public and private markets will continue to blur.

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Frontier AI governance debate heats up

Frontier labs are pushing beyond the voluntary framework laid out in Trump's June 2 executive order to mandatory federal AI testing. OpenAI released a governance blueprint calling for the Center for AI Standards and Innovation (CAISI) to become the federal government’s lead AI safety institution and, once it has sufficient capacity, to require the most capable frontier models to undergo pre-release evaluation. Anthropic went further, urging Congress to mandate catastrophic-risk testing, independent evaluations, public risk reporting, and binding government authority to block dangerous deployments. The two proposals differ in tone and enforcement teeth—OpenAI explicitly opposes giving regulators authority to block releases; Anthropic is asking for exactly that—but both point in the same direction. Frontier labs are no longer asking the government to stay out of the way, but are pushing for a federal safety framework that can keep pace with model capabilities.

That is putting preemption back at the center of the congressional AI debate. The bipartisan House proposal—the Great American AI Act—would create a federal AI framework and temporarily preempt certain state laws governing AI development, while preserving room for states to regulate many downstream uses. In the Senate, the path is more fluid. Sen. Marsha Blackburn is reportedly negotiating with the White House on an AI preemption package that could be paired with KOSA, NO FAKES, age verification, and other child-safety and creator-rights measures. But the politics remain difficult. State lawmakers, consumer groups, and some Republicans have resisted broad preemption, while Anthropic is arguing that Congress should not displace state frontier AI laws unless it enacts a federal regime at least as strong as the leading state frameworks.

Why it matters: The center of gravity in AI policy is shifting from whether Washington should regulate frontier models to what kind of federal standard should replace the emerging state patchwork. For companies building or deploying advanced AI, the key questions are no longer just compliance with today’s voluntary commitments; they are whether Congress creates a national testing regime, who runs it, whether it has teeth, and how much room states retain to regulate safety, consumer protection, child harms, data centers, and workforce impacts. A sweeping AI package before the midterms remains unlikely, but the policy architecture is coming into focus: mandatory testing is gaining traction, preemption is the bargaining chip, and frontier AI governance is becoming a live legislative fight.

Other AI policy news

• Unlikely allies: Sen. Bernie Sanders is pushing an American AI sovereign wealth fund concept that would give the public an ownership stake in major AI companies through a 50% equity tax. President Trump has also said the U.S. could take equity stakes in leading AI companies so Americans can share in the upside, with active discussions reportedly underway with OpenAI. The scale and mechanisms between the proposals differ sharply, but the convergence signals growing consensus on the left and right that AI wealth and power is becoming too concentrated and too dependent on public inputs to be left to the private sector.

• Mythos goes mainstream. Anthropic launched Claude Fable 5, the first broadly available version of its Mythos-class model, with stronger capabilities and new safeguards for high-risk use cases. Some cybersecurity, biology, and chemistry requests are routed to Opus 4.8 when flagged, and Anthropic initially disclosed that some frontier AI development requests could be limited through hidden interventions without user notice. After pushback, the company reversed course and said flagged requests will visibly fall back to Opus 4.8 or be refused with an explanation. The quick correction matters, but the episode highlights a new diligence category for enterprise AI adoption: output integrity. As firms use AI for legal review, investment analysis, valuation work, portfolio monitoring, and software development, they need to know when a model is being rerouted, constrained, or modified by vendor policy. 

Mythos-class models also require 30-day retention of prompts and outputs for trust and safety purposes, including on third-party platforms, and existing zero data retention arrangements for other Claude models do not automatically apply. 

CFTC proposes federal framework for prediction markets 

The Commodity Futures Trading Commission (CFTC) proposed its first substantive regulatory framework for prediction markets, moving from one-off disputes over event contracts toward a more formal case-by-case review process. The proposal would give the agency meaningful gatekeeping authority over contracts it determines are contrary to the public interest or unusually susceptible to manipulation, rather than imposing categorical bans across broad subject areas. It also marks a shift from a model where regulated platforms can generally list new contracts through the CFTC’s self-certification process unless the agency intervenes.

The framework takes particular aim at contracts tied to war, assassinations, terrorism, military events, and other high-stakes markets that regulators claim pose significant risks, including the leakage of classified national security information and the creation of perverse real-world incentives. The proposal comes as prediction markets are becoming a more visible input in politics, sports, media, and investor sentiment. Platforms like Kalshi and Polymarket have helped make real-time event pricing part of the policy conversation, but the market’s rapid growth has also exposed gaps in the regulatory perimeter and raised hard questions about where federal derivatives regulation ends and gambling, election, and national security concerns begin. 

Why it matters: Prediction markets are quickly becoming a signal that investors, policymakers, journalists, and market participants rely on to understand real-time expectations, and they have expanded rapidly with minimal federal oversight. But the same features that make these markets useful—binary outcomes, rapid trading, and information aggregation—also make them vulnerable to manipulation, insider trading, national security concerns, and political backlash. A case-by-case review framework gives the CFTC meaningful gatekeeping authority without shutting down the category, but it also places significant discretion in the agency to define what is and isn’t in the public interest. The sports-contract provisions could also tee up a broader fight with state gaming regulators and tribes, who have argued that some prediction markets are being used to route around state gambling regimes under the banner of federal derivatives regulation. For fund managers and investors who have come to rely on prediction market pricing as a policy signal, the rules being written now will determine how much of that signal survives federal scrutiny.

Crypto market structure hits snags on its way to the floor

The CLARITY Act cleared the Senate Banking Committee last month with bipartisan support, but the path to passage is getting narrower and more complicated. Democrats are pressing for stronger ethics guardrails to address senior officials’ crypto conflicts, including an enforceable mechanism if the Justice Department fails to act. Republicans have raised constitutional and political concerns with that approach and floated narrower alternatives, which Democrats view as insufficient. Law-enforcement groups are also pressing concerns around Section 604, the Blockchain Regulatory Certainty Act, which would protect certain noncustodial software developers from liability for third-party misuse unless they intended to facilitate illicit activity. A stablecoin compromise helped the bill advance through committee, but banks continue to argue there is too much room for deposit-like incentives. 

And these disputes are just within the Banking Committee’s portion. The Senate still has to integrate the CFTC-focused provisions that passed the Agriculture Committee on a party-line vote before leadership can assemble a floor-ready package.

Why it matters: The CLARITY Act remains the most viable vehicle for comprehensive crypto market structure legislation—and it has momentum—but its path depends on holding together a fragile bipartisan coalition to reach 60 votes. The Democrats most likely to support the bill have made it clear their votes depend on stronger ethics language, which isn’t there yet. If negotiators can resolve ethics enforcement, Section 604, stablecoin yield, and the Banking–Agriculture integration quickly, a pre-August floor vote remains possible. But the odds are slipping. Post-election, the bill’s prospects become much less likely, particularly if control of either chamber shifts. (Kalshi currently has 25% odds for market structure legislation becoming law before August, and ~40% this Congress)

Quick hits

• SpaceX prices record-setting IPO at $1.8 trillion valuation. SpaceX priced its IPO this week at $135 per share, raising $75 billion and implying a roughly $1.77 trillion valuation—the largest public offering in history. The offering sold 555.6 million shares and was more than four times oversubscribed, with retail investors reportedly placing more than $100 billion in orders. At the IPO price, SpaceX’s market capitalization nearly equals the combined inflation-adjusted value of the 29 largest U.S. IPOs since 2000. But SpaceX is more than a landmark listing; it is a stress test for the next phase of private market exits. After years of companies staying private longer and accumulating enormous valuations outside the public markets, SpaceX will show whether public investors can absorb mega-cap listings built around long-duration growth stories, limited float, and concentrated founder control. Its performance will also shape the path for other expected frontier technology IPOs, including Anthropic and OpenAI, where valuations are likely to depend less on current earnings than on investor confidence in future market dominance.

• Silicon Valley revolts against Newsom software tax plan. A coalition of 50 major technology companies is urging California lawmakers to reject Gov. Gavin Newsom’s proposed expansion of the state sales tax to digital software and his plan to permanently limit the state’s R&D tax credit. The companies argue the software tax would raise costs for widely used business tools like Microsoft Outlook and Slack, while a permanent R&D credit cut would weaken California’s competitiveness and push investment in AI, semiconductors, and other emerging technologies to other states. While the coalition opposes the software tax outright, it floated a compromise on R&D by temporarily extending the current 50% cap while allowing companies to recover the full credit value in future years. The fight highlights the growing tension between California’s near-term budget pressures and its long-term reliance on the innovation economy as a core driver of jobs, investment, and tax revenue. Lawmakers are expected to finalize the budget with Newsom by the end of June.

• Trump nominates Jay Clayton as Director of National Intelligence: President Trump nominated the former SEC chairman and current U.S. Attorney for the Southern District of New York to serve as Director of National Intelligence (DNI), a move that could help ease congressional backlash over the interim appointment of Bill Pulte and reopen stalled talks over Section 702 of FISA. The House rejected a temporary extension after Democrats objected to Pulte’s acting DNI role, leaving the surveillance authority on track to lapse. Clayton’s nomination drew bipartisan praise, suggesting a path to confirmation.  His background overseeing complex regulated markets and sophisticated private-sector actors could shape how the intelligence community approaches cyber risk, AI-enabled threats, and classified engagement with frontier technology companies, potentially favoring a more process-driven model built around risk review, confidential information-sharing, and coordination with industry rather than blunt regulations.

• Citigroup launches tokenized private-company shares: Citi launched its venture to provide trade shares of private companies through its new tokenized depository receipt product, a structure it hopes other banks will take to in a push to improve transparent investor access and liquidity in the private sector. This product, which is initially only available to foreign investors but intended to be rolled out to their U.S. client base later, will allow clients’ private-company shares to sit alongside public equities in investor portfolios. The bank is already in discussions with large private companies to get involved as investor demand builds around IPO candidates like SpaceX and Anthropic, and as companies continue to take longer to go public. Tokenization is already moving beyond concept into capital markets plumbing. For private markets, the key question will be whether these structures can expand access while preserving issuer control, transfer restrictions, custody safeguards, and valuation discipline.

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Topline:

• SEC expands co-investment relief to mutual funds and ETFs

• California puts private fund transparency back in focus

• AI giants turn to PE as the new enterprise distribution channel

• Inaugural Carta PE Policy Dinner in NYC

• SEC small business committee examines IPO frictions

• Senate Banking releases compromise on stablecoin yield in advance of markup

• Quick hits
  

SEC expands co-investment relief to mutual funds and ETFs

The SEC’s Division of Investment Management issued a no-action letter allowing open-end funds—including mutual funds and ETFs—to participate in affiliated co-investment transactions by relying on existing exemptive orders that previously covered only closed-end funds and BDCs. In practice, open-end funds can now participate in negotiated private-market transactions alongside affiliated funds or accounts managed by the same adviser without seeking a separate SEC order, provided they follow the same investor-protection conditions in the existing order: fair allocation, participation on identical terms, independent board oversight, and liquidity risk management requirements. Additionally, the relief allows co-investment approvals to be handled by a committee of at least three independent directors rather than the full board.

Why it matters: The relief is another significant step in the SEC’s push toward “responsible retailization” of private markets. Co-investments are a key way institutional investors get direct exposure to specific private credit or private equity deals, often on more favorable terms than through a traditional fund. Mutual funds and ETFs have been legally barred from that access because federal securities law restricts affiliated joint transactions absent exemptive relief. This letter closes that gap.

The practical impact is that large asset managers with both retail fund complexes and private market strategies may now allocate the same opportunities across a broader lineup—not just to institutional private funds, BDCs, or closed-end vehicles. The relief doesn’t eliminate conflict-of-interest rules; it extends a principles-based co-investment framework already available to other regulated funds, with guardrails designed to ensure retail funds are not disadvantaged relative to affiliated private funds. The board committee process also removes a real logistical bottleneck for time-sensitive deals while preserving independent director oversight.

California puts private fund transparency back in focus

California is considering SB 1319, the Private Equity Sunshine Act, which would expand disclosure requirements for alternative investments held by public pension and retirement systems. The bill covers private equity, venture, hedge funds, private debt, and real assets, and would require reporting on fund ownership, investor commitments, benchmarks, continuation fund transactions, extended-term fees, portfolio company workforce and location data, and distressed debt information. The measure is framed as public-pension transparency for workers, retirees, and taxpayers, but opponents argue the bill goes well beyond fee and performance transparency by requiring disclosure of sensitive fund, transaction, and portfolio company information that top-tier managers may be unwilling to provide. Notably, CalPERS and CalSTRS oppose the bill as currently drafted, warning that expanded disclosure could make state public pension systems less competitive as LPs.

Why it matters: After the Fifth Circuit struck down the SEC’s private fund adviser rule and the agency shifted its posture toward private capital regulation, states are stepping in to fill a perceived transparency void. As public pensions, retail vehicles, and retirement plans increase exposure to alternatives, policymakers are moving from abstract debates over access to more concrete questions about the plumbing of private markets: fees, valuation, benchmarking, continuation funds, conflicts, liquidity, and underlying portfolio-company practices.

What’s next: SB 1319 has momentum and has already advanced through the Senate Judiciary Committee. Given pension fund opposition, the contours could shift if the bill continues to move. The bigger question is whether California becomes a template for states seeking to regulate private capital where federal regulators have pulled back.

AI giants turn to PE as the new enterprise distribution channel

OpenAI and Anthropic are moving forward with competing private equity-backed ventures, marking a new phase in the race to commercialize generative AI beyond API licensing. OpenAI has reportedly raised more than $4B for “The Deployment Company,” a new venture valued around $10B and backed by investors including TPG, Brookfield, Advent, and Bain. Anthropic formally announced a new AI-native enterprise services firm valued at $1.5B with Blackstone, Hellman & Friedman, and Goldman Sachs, backed by investors including Apollo, General Atlantic, GIC, Leonard Green, and Sequoia.

Why it matters: PE is becoming a go-to-market layer for enterprise AI. Rather than waiting for mid-market companies to adopt AI tools on their own, both companies are using sponsors’ portfolio networks as distribution channels, pairing capital, embedded engineering resources, and implementation support to accelerate adoption across thousands of companies.

• For PE, this is a private-market value creation story. Sponsors are under pressure to find operational levers as exit timelines stretch and portfolio companies face margin pressure. AI deployment offers a new playbook: automate coding, finance, customer support, healthcare administration, compliance, and back-office workflows, and then translate those gains into EBITDA improvement.

• For OpenAI and Anthropic, the PE channel accelerates enterprise adoption, deepens customer lock-in, and builds a services layer around their models as competition intensifies, as both companies are eyeing IPOs this year.

• For regulators and policymakers, the shift raises a new set of questions around AI governance, vendor concentration, data access, cybersecurity, and whether AI transformation inside portfolio companies is being matched by adequate oversight and controls. Congress may not agree on a comprehensive framework this year, but regulators will start looking at use cases.
  

Inaugural Carta PE Policy Dinner in NYC

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Last week, the Carta team hosted its first PE Policy Dinner in New York at Ci Siamo. The food was excellent, but the company was even better. We covered the SEC regulatory outlook, increasing scrutiny around private credit, and how the push toward democratization could bring more attention to fund operations, including diligence and valuations. We also discussed how AI is changing the landscape, the increasing role of the states, and the opportunities—and challenges—that lie ahead for private capital.

These dinners are about more than a great meal. They provide us an opportunity to share insights, build community, and most importantly, learn from you. Stay tuned for the next one.

SEC small business committee examines IPO market frictions

The SEC’s Small Business Capital Formation Advisory Committee met to examine why fewer small and mid-sized companies are going public, and, more importantly, what the agency can do to make the IPO path more viable. The discussion, which featured remarks from Chairman Atkins, along with Commissioners Peirce and Uyeda, focused less on any single factor and more on the accumulated frictions that make becoming and staying a public company increasingly difficult for smaller issuers. Policy ideas included:

• Regulatory on-ramps. Extending IPO on-ramp accommodations beyond five years after a company goes public, giving smaller firms greater certainty and a longer runway as public companies.

• Shelf registration modernization. Updating Form S-3 “baby shelf” rules to give nearly all smaller public companies full shelf registration access, enabling faster capital raises when market windows are open.

• Reporting flexibility. Allowing companies the option to file regulatory reports quarterly or semiannually based on their industry, business model, and investor expectations, rather than being locked into mandatory quarterly reporting.

• Post-IPO market ecosystem. Participants flagged weak analyst coverage and limited aftermarket support as compounding barriers. Nearly half of small- and mid-cap stocks have no analyst coverage, undermining liquidity, investor awareness, and the value proposition of being public. Participants also discussed ways to incentivize coverage for small issuers, revisit market-making rules, and move toward a company registration model to improve post-IPO capital access.

Why it matters: The discussion highlighted a deeper structural problem: public markets are no longer functioning effectively as a capital-raising mechanism for smaller companies. As Chairman Atkins noted, companies today often do not go public until after Series E, whereas 20 years ago an IPO would have looked more like today’s Series B or C. That shift reflects more than market preference;it reflects accumulated regulatory cost, execution risk, and ongoing compliance burden.

The result is a public market that increasingly functions as an exit ramp for late-stage private capital rather than an on-ramp for ordinary investors. Atkins’s agenda aims to address those structural costs, while the SEC’s broader Reg S-K review provides the vehicle to revisit the recurring disclosure obligations that make staying public expensive. Together, the efforts align with broader capital formation reforms, including the INVEST Act provisions Carta has supported, to modernize the private-to-public company lifecycle and make the IPO path more practical for the next generation of American companies.

Senate Banking releases compromise on stablecoin yield in advance of markup

Senate Banking is reportedly targeting a May markup for the CLARITY Act after Sens. Thom Tillis and Angela Alsobrooks released compromise language on stablecoin yield, but any deal is far from done. The text would prohibit crypto firms from paying interest or rewards on stablecoin balances that are “economically or functionally equivalent” to a bank deposit, while preserving activity-based rewards tied to bona fide uses like payments, transfers, market-making, staking, governance, and loyalty programs. Crypto advocates quickly embraced the language, but leading banking trades said the proposal “falls short,” warning that carve-outs based on balance size or holding duration could recreate deposit-like yield under a different label.

The issue: Stablecoin yield has become a gating issue for digital asset market structure. The policy distinction is real: a stablecoin that pays users simply to hold it looks more like a deposit substitute; a stablecoin that rewards users for transacting looks more like a payments network. But the political problem is that the compromise relies on regulators to police that line after the fact. That may be workable for crypto platforms seeking flexibility, but it is not enough for banks that want a bright-line prohibition before the bill leaves committee.

The catch: Chairman Tim Scott needs the yield language to hold together a bipartisan markup, but the banking coalition’s rejection means the compromise could require another round of negotiation in a narrowing legislative window. And even if a bipartisan majority lands on yield, other unresolved issues—DeFi treatment, noncustodial developer protections, illicit-finance safeguards, and ethics provisions—could further complicate the path forward.

What’s next: CLARITY is closer than it was a week ago, but its path remains fragile. Prediction markets now put passage in the 40% range, down from more than 80% in February (not an endorsement, but a useful signal of how quickly momentum can fade). The markup will be the first real test of whether the Tillis-Alsobrooks language is a bridge to bipartisan consensus or another placeholder in a debate that is running out of calendar. Every week of delay makes passage harder.

Quick hits

• Trump signs executive order expanding retirement benefits. President Trump signed an executive order directing the Treasury to launch TrumpIRA.gov by Jan. 1, 2027, creating a federal platform where private sector workers without employer-sponsored retirement plans can browse and enroll in eligible, low-cost private sector IRAs. The portal launch is timed to coincide with the rollout of the SECURE 2.0 Saver’s Match, which converts a prior nonrefundable tax credit into a direct government contribution of up to $1,000 per year for eligible lower-income workers who contribute to qualifying retirement accounts. For startups, small businesses, gig workers, and independent contractors, the portal could lower search and onboarding frictions for basic retirement access.
  
  Carta shares the view that expanding retirement access is essential. Our Carta 401(k) partnership with Vestwell and Morgan Stanley brings enterprise-grade plans to startups. We are also pursuing regulatory relief to allow employees to be able to contribute their equity compensation to their retirement plans.
  
  

• Counting up carried interest. Recent analysis from Yale’s Budget Lab estimates that taxing carried interest more like ordinary compensation could raise roughly $90B over 10 years, nearly double prior estimates. The industry successfully fended off changes during Build Back Better, the Inflation Reduction Act, and the One Big Beautiful Bill negotiations, but a larger revenue score could make carried interest a more tempting offset and put it back in the crosshairs in the next tax debate. Democrats have long attacked carried interest as a Wall Street giveaway, but populist Republicans are increasingly adopting the same sentiment.
  
  

• CFPB finalizes small business data rule. The CFPB finalized revisions to its Section 1071 small-business lending rule, scaling back a Biden-era framework that banks and credit unions had argued would be costly and could chill lending. The final rule lowers the small-business revenue threshold from $5M back to $1M, raises the reporting trigger from 100 to 1,000 covered small-business loans, reduces the number of data points lenders must collect, and excludes certain products, including merchant cash advances.
  
  

• Senate bans members and staff from betting in prediction markets. The Senate unanimously banned members and staff from prediction market betting to prevent insider trading on sensitive government information. The resolution, by Sen. Moreno (R-OH), is effective immediately and reflects bipartisan consensus on market guardrails. While the move gained industry support, debate continues regarding the adequacy of existing fraud authorities. Separately, Sens. Gillibrand and McCormick introduced legislation for CFTC clarity and a broader federal ban on political insider trading.

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