My Crypto Lawyer Sec Speeches Cryptocurrency Remarks to the Small Business Capital Formation Advisory Committee

Thank you, Marcia [Dawood].[1] Good afternoon and it is good to see some of the members of the Advisory Committee in person. Thank you to our guests—Edwin O’Connor and Beau Bohm—for leading the deep dive into encouraging more companies to go public.

Nearly four years ago at this Committee, I raised concerns about the declining number of public companies and the regulatory headwinds compounding that trend.[2] The current Commission is dedicated to reversing that trend and has embarked on a reform agenda to accomplish that objective. While the number of initial public offerings (IPOs) has shown some signs of improvement,[3] that recovery has been uneven—disproportionately benefitting larger and later-stage companies[4]—and for the small companies this Committee exists to serve, many barriers remain.

The challenge of going public is particularly acute for small companies. Data from today’s Committee agenda indicates that small companies made up 44% of 2024 IPOs but raised only 3% of the capital.[5] That disparity suggests that while small companies are still attempting to access the public markets, the economics may be broken. Fixed compliance costs, underwriter economics, and a regulatory framework calibrated for large issuers make it extraordinarily difficult for small companies to raise meaningful capital through a public offering. The result is a public market that is increasingly the domain of large, late-stage companies—and a shrinking opportunity set for investors who want to participate in earlier stage growth.

The consequences of a less hospitable public market for small companies are not abstract. They impact the founder who cannot raise the capital, the early investor waiting years for a liquidity event that may never come as an IPO, and the ordinary American who is increasingly a spectator to growth that happens out of their reach. A public market that functions as an exit ramp for private capital rather than an on-ramp for ordinary investors is not serving its foundational purpose.

The barriers here are both economic and structural—and addressing only one without the other will not be enough. A healthy IPO market depends on the ecosystem that surrounds the transaction—the analyst coverage that generates investor awareness, the market-making that provides post-IPO liquidity, and the institutional interest that contributes to price discovery in the aftermarket. For small companies, that ecosystem has quietly eroded over the years. Analyst coverage has thinned—the OASB’s 2024 Annual Report found that 44% of small- and mid-cap stocks have no analyst coverage at all.[6] Without coverage, investors may be more hesitant to take positions, which can negatively affect liquidity. Thus, for a small company contemplating an IPO, going public makes little sense if the costs exceed the benefits.

Each of these problems reinforces the others, and no single regulatory fix addresses all of them. What is needed are changes to make the small company IPO more viable—and a Commission willing to take those steps. Ideas such as modernizing the shelf registration process, revisiting quarterly reporting, and reviewing the emerging growth company framework and our outdated filer category thresholds would be valuable first steps.

That brings me to the questions I hope today’s discussion will help answer. Are our public company requirements tailored to the companies that need access to public capital—or to the companies that can most easily absorb the cost of compliance? What would an appropriately scaled regulatory framework look like? Have the rules governing research coverage, underwriter compensation, and post-IPO market-making kept pace with how those markets actually work today—or are they quietly discouraging the very activity we are trying to encourage?

This Committee has the expertise and the mandate to help us answer these difficult questions. To all members of the Committee: thank you for your service and your continued engagement. The work you do here matters to the entrepreneurs and investors you represent, as well as the long-term health of our capital markets. I look forward to hearing from the Committee on these important issues.