SEC Exempts AI Data Center ABS from Core Regulatory Requirements

The U.S. Securities and Exchange Commission (SEC) recently issued an internal memo exempting asset-backed securities (ABS) related to AI data centers from core investor protection regulations established after the 2008 financial crisis, including the "risk retention" requirement that mandates issuers to retain a portion of the debt. The SEC determined that data centers are not financial assets that are liquidated over time, and therefore, the securities linked to them should not be subject to the same regulatory constraints as ABS related to auto loans or mortgage loans. Although this move is not an official amendment to the law, its practical impact should not be underestimated, as companies generally comply with relevant regulations out of prudence. Data shows that the annual issuance of data center ABS has surged from $2.4 billion in 2020 to $15.5 billion in 2025, growing more than sixfold over five years, with expectations to reach a new historical high in 2026.

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