Recently, the SEC announced a “comprehensive review” of its consolidated audit trail, or “CAT,” and asked for public comments due in 60 days, on June 15, 2026, including on whether the commission should “eliminate the CAT in favor of developing a different audit trail and/or data source, . . . ”
Every American investor should answer with an emphatic: “Yes!” Here’s why.
The SEC’s CAT is an LLC that tracks, collects, and analyzes all securities transactions made by every investor in real time. Its size is unfathomable: SEC collected and stored 116 trillion transactions in 2023 and 154 trillion more in 2024.
What the SEC does with this vast database is unconstitutional. Without even a whiff of wrongdoing, the SEC plumbs the CAT in search of potential securities violations. This is spying, plain and simple. And it turns the Fourth Amendment, which forbids unreasonable “searches and seizures,” upside down. The CAT seizes all Americans’ trading data first and asks questions later. This quintessentially unreasonable scheme allows the government to mine indiscriminately seized data in a dragnet in search of a crime.
The SEC’s Fourth Amendment workaround is to encrypt the data and learn investors’ identities only after it detects suspicious trading. But that does not excuse the SEC’s widespread, causeless seizures followed by searches any more than it would permit a police department, without suspicion, to seize the contents of self-storage units citywide and allow officers to rifle through them seeking evidence of potential wrongdoing. That law enforcement does not know the owner’s name at the time of the search and seizure matters not.
SEC Commissioner Hester Peirce, an early objector to the CAT, agrees. She recently observed that “no matter how many procedural steps we add before a regulator” can link an investor to particular trades, “restraints on government power have to contemplate” that the SEC might use the data “to stalk personal or political enemies.”
The CAT scheme also guts the Fifth Amendment’s guarantee of due process and puts your investment choices under the government’s all-seeing eye, permitting bureaucrats, and others – some thousand individuals outside the government have access to the CAT database – to discover the companies in which you trade. It’s nobody’s business where you choose to invest, and most certainly not a leaky government’s. Not to mention that cyberhackers could access and even steal your pension funds, college savings accounts, and retirement savings.
To make matters worse, Congress has passed no law authorizing this dangerous Orwellian scheme, nor has it authorized any appropriations to pay for it. And for good reason. The public outrage at this violation of Americans’ civil liberties would swiftly kill any such bill. Since when can a mere agency run a massive spy operation without congressional authority and approval?
Seizing, storing, and unleashing bots to search trillions of data points is not only unlawful but expensive. CAT’s original estimated annual costs exceed $155 million for 2026. The SEC has long admitted these costs are passed on to investors, serving as unlegislated deadweight taxes. In other words, American investors have the privilege of paying for the SEC to illegally spy on their trading activity.
The SEC assures us that it “takes seriously concerns related to the appropriateness of government surveillance.” But, writing some 30 years ago, the late Sen. Daniel Patrick Moynihan observed: “Information is power, and it is no mystery to government officials that power can be increased through controls on the flow of information.” If information is power, then the government’s wholesale seizure, enduring possession, and control over this information is absolute power.
On April 16, 2026, Commissioner Peirce commented that her “deepest concerns … remain squarely in the realms of liberty and privacy.” Every American, regardless of whether they have something to hide, should fear a government that levies unfounded charges that are costly to defend; that “peers into other areas” of private life; that uses the CAT to “single out individuals for personal or political reasons;” and that does “not hesitate to build backdoors elsewhere.” She asks, perhaps we must “acknowledge that the very concept of a massive surveillance database may simply be incompatible with the principles of civil liberty that are foundational to our society?”
Adding to the grave concerns about government overreach are cybersecurity risks, compounded by AI technology. In April, Anthropic announced that it would not publicly release its AI model Mythos. The Mythos technology had been able to identify thousands of unknown flaws in IT systems, known as “zero days,” which could be exploited by cyberhackers. Christopher A. Iacovella, president and chief executive officer of the American Securities Association, recently explained in the Washington Times how this sort of AI technology could be unleashed on the CAT database and exploited by foreign enemies who could use the detailed information about Americans’ trading habits to identify precisely when to launch an attack designed to maximize economic harm. Even Americans who are unconcerned with their constitutional rights should fear the national security cybersecurity threats, which could wipe out life savings.
It is unlikely the SEC will abandon the CAT absent a public outcry. Americans need to demand that the SEC kill the CAT, stat – and insist the SEC abandon any plans to replace it, absent congressional authority, funding, and constitutional safeguards.
Peggy Little and Caitlin Moyna are senior litigation counsel at the New Civil Liberties Alliance, which is suing the SEC over the CAT in the Western District of Texas.
