House Democrats are questioning the SEC about AI-powered trading agents used by retail investors, citing concerns over investor protection, market integrity, and regulatory oversight. They have asked the SEC for written responses to a list of questions by July 31.
The inquiry highlights growing regulatory scrutiny over the use of artificial intelligence in financial markets, potentially leading to new rules or enforcement actions that could impact AI developers, trading platforms, and retail investors.
A group of Democratic U.S. House lawmakers has formally questioned the Securities and Exchange Commission (SEC) regarding its oversight of artificial intelligence-powered investment advisors. In a letter dated Tuesday, the lawmakers expressed concerns that trading platforms offering AI agents to retail investors raise significant issues for investor protection, broker-dealer responsibilities, market integrity, and the accountability of AI developers.
The representatives noted that while such AI trading may currently be limited, there are indications it could expand to a broader range of financial products, including options, cryptocurrency, event contracts, and futures. They pointed to the growing popularity of AI agents among crypto users and their adoption by retail traders in traditional equities seeking an edge.
Coinbase was cited as one of the latest major platforms to introduce an AI agent, which it registered with the SEC and Commodity Futures Trading Commission (CFTC) as a financial advisor capable of providing trade guidance. However, the lawmakers stated that these agents have operated "largely outside the securities regulatory framework," despite making "consequential investment decisions on behalf of retail investors."
The letter highlighted that disclosures accompanying these AI agents often state that brokerage platforms cannot guarantee the accuracy or suitability of AI outputs and cannot control, monitor, or audit the agents. Such disclaimers, the lawmakers argued, create "urgent questions about the regulatory treatment of agentic trading tools and create uncertainty regarding legal responsibility among brokers, AI developers and retail investors."
Led by Representatives Bill Foster and Brad Sherman, the letter requested that the SEC provide written responses to a series of questions by July 31. These questions include inquiries about the guardrails and analysis the agency has in place for AI agents, when an AI agent would require registration, and the extent of the SEC's consultations with platforms regarding AI. The lawmakers also asked if the SEC possesses the necessary authority to address the risks posed by AI agents or if congressional action is required.