Will SEC Chair Face Scrutiny From Democrats

Democrats and the SEC

A Securities and Exchange Commission (SEC) Chair appointed by a Democratic President under pressure from Democrats? It could happen soon. Republicans are already confronting Chair Gary Gensler and his agency.

Given last week’s demands for regulatory clarity amid an insider trading enforcement action brought by the SEC against a former Coinbase employee and others, blockchain-friendly Democrats may need to confront the SEC directly – likely after this fall’s elections.

Even Commodity Futures Trading Commission’s (CFTC) Caroline Pham seemed perplexed by the SEC’s latest action while quoting from James Madison’s Federalist No. 49. Noticeably silent was SEC Commissioner Hester Peirce whose past calls for regulatory clarity versus the use of enforcement are well-known.

The point isn’t that crypto markets should not be regulated. Far from it. But currently, these new, innovative markets are only regulated through enforcement. If Industry knew the rules at the outset, then it would be less likely to run afoul of securities laws. The SEC seems to be saying that regulation begins and ends with the early 20th century’s Howey Test (see PDF from 2019 on SEC website) and that’s all the clarity needed.

Democratic pressure on the SEC and Chair Gensler could build from any number of Senators and Representatives who are busy working on crypto regulation -even the President. The only thing preventing a Democrat-SEC collision is this fall’s elections as well as an extended crypto winter making crypto less interesting to voters and therefore Congress.

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SEC and CFTC Commissioners Reach Out To The Industry at DC Blockchain Summit

DC Blockchain Summit

A collegial chat between regulators from the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) highlighted an impressive day-long agenda attracting 850 attendees to the DC Blockchain Summit from the Chamber of Digital Commerce in Washington, D.C. yesterday.

The Chamber’s Annemarie Tierney didn’t hesitate in her moderation role in the morning session with the blockchain industry’s two most important regulatory bodies and immediately brought to the fore the key differences in jurisdiction between the two agencies – securities vs. commodities – and under which agency do the various tokens and cryptocurrencies land. Commissioner Hester Peirce of the SEC went first and repeated the gyst of her well-known views that do not necessarily sync with the rest of the SEC commissioners and its Chairman:

“A token [that] is sold as part of securities offering does not in my mind necessarily mean that the token continues on in its entire life to have to be treated as a security. That’s one of the areas where I’d like to see us provide more clarity. It has not been our standard practice over the years to identify what are security offerings and what aren’t. It’s pretty broad rules. And we expect that when people are out there raising capital, they comply with our initial offering rules, regardless of what it is. But that’s led to the treatment of certain things – securities offerings that you might not think the underlying object to be sold is [part of the securities offering]. So that’s the distinction – I would like us to deal with it better (…)”

CFTC Commissioner Christy Goldsmith Romero weighed in next saying that she agreed with her counterpart in the SEC on the overall need for greater clarity – particularly around that which is decentralized. Beyond the jurisdictional question, in order to help her create a regulatory framework, Goldsmith Romero appealed to the audience on educating her and the CFTC on how the blockchain community innovates and also protects consumers: Continue reading “SEC and CFTC Commissioners Reach Out To The Industry at DC Blockchain Summit”