With control of Congress at stake, U.S. voters head to the polls next week for midterm elections to make their voices heard on pressing issues including affordability, the ongoing conflict in Iran, and immigration. For financial services firms, several key policies and attitudes toward innovation and regulation are in question depending on election results.
Former SEC Commissioner Troy Paredes and Zack Condry, Vested’s Head of Public Affairs and Special Situations, led a conversation at Vested’s New York headquarters last Wednesday on what financial services firms should expect heading into the midterms.
Condry opened the discussion with the latest read from pollsters he had spoken with that day, which pointed toward Democrats winning both the House and the Senate. While a Democratic Congress cannot directly stop agencies like the SEC or CFTC from pursuing their agendas, Paredes explained that it can slow them down. Pulling agency leaders into hearings and investigations consumes the time and energy needed to finish their work, which helps explain the expected rush of agency activity ahead of January when new elected leaders are sworn into office.
The scrutiny will reach well beyond government. Banks, hedge funds and financial services firms more broadly should expect questions about what they did, how they did it and where the money went. One theme ran through the whole conversation–what makes policy last when each administration unwinds the work of the one before it.
Durability comes from adoption
The political pendulum swings, and over the last decade agencies have shown far more willingness than in the past to unwind what their predecessors did. Paredes noted that rules can be rescinded, orders changed, and enforcement priorities reset with relative ease.
What is harder to undo is something people have come to rely on. Paredes called this pragmatic durability. If a policy takes root and people find it useful, a future administration faces real resistance in rolling it back, whatever the rulebook allows.
Digital assets are the clearest test. The SEC and CFTC have moved quickly to advance President Trump’s goal of making the U.S. the capital of digital assets, a sharp change from the prior administration. While the CLARITY Act has not become law, Paredes’ view is that the agencies were always going to carry much of the load either way on pushing this agenda forward. How much of this takes hold before 2029 will shape how much of it survives.
Agency independence has been redefined
On June 29th, the Supreme Court decided Trump v. Slaughter, overruling its 1935 decision in Humphrey’s Executor and striking down the for-cause removal protections that had shielded commissioners with a layer of autonomy. In Paredes’ view, the practical effect is that commissioners at agencies like the SEC and CFTC can now be removed by the President for any reason, placing those agencies squarely within the executive branch.
Paredes dissented on several votes as a Republican commissioner under President Obama. He said the prospect of being fired never crossed his mind at the time. Under today’s framework, he posits that it would have been a real possibility.
As a result, we see a shift in commission composition, with the bipartisan five-member structure likely a thing of the past. Nominees have traditionally been confirmed in pairs across party lines, and that arrangement breaks down when a President can remove the other party’s commissioner as soon as they are seated. Paredes expects to see more small or single-party commissions going forward, noting that the SEC has two commissioners and the CFTC has one.
A consequence of expanded executive oversight and a breakdown in partisan balance in commissions is that Congress legislates the expansion of agencies’ rulemaking responsibilities. For example, the CLARITY Act would have handed agencies significant new authority. Delegating that power to a bipartisan commission is a different proposition from delegating it to a single-party body that reports to the President, a point Justice Gorsuch raised in his concurrence. Condry added that this accelerates a broader shift toward policy being set by a small number of technocrats.
For perspective, the country has long managed with Treasury reporting to the President, and Paredes expects it will manage with the SEC and CFTC on similar footing.
What is likely to last
Asked which changes will endure regardless of who holds power, Paredes started with what likely will not.
In September, the SEC proposed rescinding Rule 14a-8, the rule that requires companies to include qualifying shareholder proposals in their proxy materials, on the grounds that it exceeds the agency’s authority. If the rule is rescinded and a Democrat wins the White House in 2028, Paredes expects it to return in a more permissive form than before. He sees the same risk for the proposal to make semiannual reporting mandatory and quarterly reporting optional, and expects many companies to hold off on using that flexibility in the early years.
Both speakers stressed that a reversal rarely lands back at the starting point. Once a long-settled rule is opened up, the next administration tends to push it somewhere new. Condry expects a reinstated rule to come back with fresh requirements attached.
Tokenization has a better chance. Paredes separated the unsettled question of what counts as a security, which he expects to keep shifting, from efforts to use blockchain to modernize how familiar assets are issued, held, and transferred. Pointing back to the idea of pragmatic durability, if tokenization of real-world assets draws billions in investment and regulated firms build on it, it becomes much harder to reverse.
AI may be the most consequential area to watch. Chairman Atkins has said firms have room to deploy it, and the SEC’s Division of Investment Management has invited firms to raise any rules that stand in the way. The conditions for innovation are currently in place for those eager to take advantage of the administration’s favorable attitude. Paredes sees real potential for AI to widen access to financial services for investors who are underserved today, provided the right guardrails and governance are in place.
What this means for financial services firms
The period between now and 2029, when the next President assumes office, is an opening. Firms in digital assets, payments, fintech, and AI-driven services can build the adoption and public acceptance that outlasts any single administration. The more customers rely on a product or practice, the harder it becomes to unwind.
That opening comes with scrutiny. A Democratic Congress would bring more hearings and investigations, and future regulators will look back at the choices firms make now. The decisions worth making today should be ones a firm would be comfortable defending to a very different set of policymakers.
For more on public affairs strategy, read Zack Condry’s recent Insights piece here.
