ICYMI: WSJ Editorial Highlights ASA's Victory Striking Down SEC's CAT Funding Model

WASHINGTON – The Wall Street Journal Editorial Board highlighted ASA's unanimous legal victory striking down the U.S. Securities and Exchange Commission's (SEC) Consolidated Audit Trail (CAT) funding model.

Read the full Wall Street Journal editorial below:

The Gensler Surveillance Tax Goes Down

By The Editorial Board

July 28, 2025 5:36 pm ET

Gary Gensler is back in private life, but his legal losing streak as Chair of the Securities and Exchange Commission continues. On Friday an Eleventh Circuit Court of Appeals panel struck down a tax that his SEC sought to impose on investors to fund a government surveillance scheme.

The SEC’s Consolidated Audit Trail (CAT) is a classic example of government overreach that the Constitution intended to prevent. The Obama SEC used the stock “flash crash” in 2010 as a pretext to create this electronic system to sweep up personal information on every stock trader and real-time information on their trades.

Regulators claimed such a database would help investigate market manipulation, insider trading and fraud—never mind that Congress hasn’t given the SEC authority for such a system. Or that the lack of one didn’t impede the Justice Department from bringing criminal charges against the trader behind the flash crash.

The Obama SEC handed off the job to build this system to stock exchanges and “self-regulatory organizations” that supervise brokerage firms. After the cost for this system soared, Mr. Gensler and the Biden SEC sought to stick brokers and investors with the bill. The American Securities Association and Citadel Securities sued.

All three judges on the Eleventh Circuit panel, which includes Obama, Trump and Biden appointees, agreed that the SEC’s “fees” to pay for the system were arbitrary and capricious. “The cost of setting up this uniform electronic audit system exceeded the Commission’s 2016 estimate by eight times,” Judge Andrew Brasher writes.

Alas, the judges didn’t address the plaintiffs’ argument that the CAT regime exceeds the SEC’s authority and usurps Congress by taxing investors and appropriating money without legislative permission. A separate lawsuit in federal court in Texas argues that the database violates the Fourth Amendment’s prohibition against unreasonable searches and seizures.

“The CAT is a system that one would expect to find in a dystopian surveillance state, not the shining beacon for liberty and the free world,” Republican Commissioners Hester Peirce and Mark Uyeda said in December. “The CAT system is expensive and essentially funded by the public but operates outside the direct oversight or authorization of Congress.”

The Eleventh Circuit decision vacates Mr. Gensler’s tax and gives new SEC Chair Paul Atkins an opportunity to kill this big unconstitutional dig.

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The American Securities Association (ASA) represents the retail and institutional capital markets interests of regional financial services firms who provide Main Street businesses with access to capital and advise hardworking Americans how to create and preserve wealth. ASA’s mission is to promote trust and confidence among investors, facilitate capital formation, and support efficient and competitively balanced capital markets. This mission advances financial independence, stimulates job creation, and increases prosperity. The ASA has a geographically diverse membership of almost one hundred members that spans the Heartland, Southwest, Southeast, Atlantic, and Pacific Northwest regions of the United States.