SEC Commissioner "Crypto Mom" Hester Peirce stated: Any Layer 2 that relies on a centralized sequencer could potentially be classified as an "exchange" by the SEC. The core logic is simple—what you call it doesn’t matter; what matters is its actual function. If the matching engine and transaction sequencing are controlled by a single entity, then it’s no different from a traditional exchange. Over the past few years, in order to combat MEV and improve efficiency, most L2s have opted for centralized sequencers. While this has mitigated issues like frontrunning and sandwich attacks, it has also introduced compliance risks due to single-point accountability. So, if this issue is formally brought under regulation, L2s will have only two paths forward: 1️⃣ Either register and admit they are exchanges, accepting the full compliance framework; 2️⃣ Or dismantle single-point control and move toward multisig, sequencing networks, or other trust-minimized solutions. Currently, L2s fully reliant on centralized sequencers include: - Arbitrum (single Arbitrum Sequencer node) - Optimism (single block producer) - Base (single Coinbase Sequencer node) - Linea (centralized sequencer based on Besu) - Starknet (single sequencer) Projects that have already achieved decentralization: - Metis (the first Layer 2 to run a decentralized sequencer)