Congressman Brad Sherman and Lawmakers Call on SEC to Protect American Investors and the Integrity of U.S. Financial Markets

October 30, 2026 Press Release WASHINGTON, D.C. — Congressman Brad Sherman (CA-32), Ranking Member of the House Financial Services Subcommittee on Capital Markets, is calling on Securities and Exchange Commission (SEC) to stand up for American investors and the integrity of U.S. stock markets. In two letters to the SEC, Congressman Sherman and his colleagues warned that new products and trading venues are allowing U.S. stocks to be traded outside the investor protections Congress put in place under federal securities laws. Today, Congressman Sherman and Congresswoman Joyce Beatty (OH-03) called on the SEC to prevent a new category of high-risk financial products, known as “perpetual derivatives,” from launching on prediction market platforms as early as November 2nd. These products allow individuals to place highly leveraged bets on the price of a company’s stock and allow the platform to automatically close out the position under rules the platform itself sets and can change. As a result, an investor can lose the entirety of their investment, even if the stock eventually recovers. By ceding its authority to the Commodity Futures Trading Commission, a far smaller agency that is not equipped to regulate products tied to individual stocks, the SEC is leaving Americans who trade them without the protections guaranteed under federal securities laws. The letter urges the Commission to assert its authority over these products and prevent them from trading until those protections are fully in place. Last week, Congressman Sherman also led a letter with Representatives Bill Foster (IL-11), Stephen F. Lynch (MA-08), Joyce Beatty (OH-03), Sylvia R. Garcia (TX-29), and Nikema Williams (GA-05) urging the SEC to withdraw its new “Innovation Exemption,” which lets unregulated crypto companies avoid our securities laws and regulations. The exemption lets crypto platforms trade digital versions of U.S. stocks without following the rules that apply to traditional stock exchanges, rules that were put in place after hard lessons from past market crashes to prevent similar market failures and protect investors. The lawmakers warned this creates a second, lightly regulated stock market where investors have fewer protections and where criminals and foreign adversaries could quietly buy stakes in American companies. The letter urges the Commission to rescind the exemption in its entirety and require these platforms to register with the SEC and follow the same rules as every other stock exchange. “Americans who invest their hard-earned money deserve the full protection of our securities laws, no matter what platform they use or what product they’re sold,” said Congressman Sherman . “Whether it’s a prediction market offering supercharged bets on individual stocks or a crypto platform trading digital copies of American shares, the result is the same: everyday investors are exposed to big losses, and our markets are opened up to manipulation and illicit money. The SEC has the authority to stop this. It must use it now, before Americans lose their savings, not after.” To read the full letter on perpetual derivatives, click here . To read the full letter on the Innovation Exemption, click here . Issues : Consumer Protection Economy Taxes and Trade