Reps. Torres And Flood Highlight SEC Oversight Hearing With Chair Gensler

SEC Chair Gensler at House Financial Services hearing

Republicans didn’t waste any time questioning the moves and motives of Securities and Exchange Commission (SEC) Chair Gary Gensler at the House Financial Services (HFS) “SEC Oversight” hearing today.

Video is here.

Minutes before the hearing commenced, a full-throated rejection by the Committee’s Republican caucus “slamming the agency for its persistent failure to conduct thorough economic analysis or consider stakeholder feedback regarding its regulatory agenda” was announced in the form of a letter to Chair Gensler. Read the release -and the letter.

Yesterday’s letter on Bitcoin spot market ETF’s sent by HFS committee member Rep. Mike Flood may have been more impressive given its bipartisan nature – both Rep. Ritchie Torres (D, NY) and Rep. Wiley Nickel (D, NC) signed on.

two things

As it turned out, during the hearing, the most revelatory moment related to digital assets was arguably provided by a Democrat (Rep. Torres (D, NY)see below), Tokenization is a tripwire when it comes to securities laws for Chair Gensler.

And, another highlight was Rep. Mike Flood’s (R, NE) questioning of Chair Gensler about Staff Accounting Bulletin 121 (SAB 121) and, separately, Flood’s announcement about the new “Uniform Treatment of Custodial Assets Act” which would gut the SEC’s bulletin. See below.

Also: This was an uninterrupted 4.5 hour hearing that ended at 2:29 p.m. ET. Wow. April’s House SEC Oversight hearing was only 3 hours and 45 minutes. Continue reading “Reps. Torres And Flood Highlight SEC Oversight Hearing With Chair Gensler”

Come In And Register – How Does That Really Go? Robinhood Tells All At House Ag Hearing


Securities Exchange and Commission (SEC) Chair Gary Gensler has often said in the media that aspiring, well-regulated crypto companies should “come in” and “register” with the SEC.

See his speech in September 2022, for example.

But, how does that really go? Rep. John Rose (R, TN) wanted to know.

During the second panel of the day for House Agriculture’s digital assets hearing, “The Future of Digital Assets: Providing Clarity for Digital Asset Spot Markets,” Rose asked Dan Gallagher, Chief Legal Compliance and Corporate Affairs Officer, of Robinhood Markets, to discuss his own company’s pro-active registration attempt with the SEC for its crypto product:

“We actually came in and we did it proactively. We weren’t being investigated by the SEC. And we did it just because he wanted folks to do it. We thought it was good for our business and our customers.  We went through a 16-month process of trying to register a special purpose broker dealer. And then we were pretty summarily told in March [of this year] that that process was over and we would not see any any fruits of that effort.”

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Partisan Questioning of SEC Chair Gensler Leads To Few Surprises In HFS Oversight Hearing

HFS and the SEC

Today’s hearing of the House Financial Services (HFS) Committee hearing on Oversight of the Securities and Exchange Commission (SEC) started before it began as the Committee’s Republicans led by Chair Patrick McHenry (R, NC) fired off a condemnation of SEC Chair Gary Gensler’s handling of digital assets in advance of the hearing’s start.

See the letter (PDF). And, see the accompanying press release.

In the letter, HFS Republicans called out Chair Gensler for misrepresenting his agency’s willingness to perform registration of digital asset companies. “You have been outspoken in your push for digital asset trading platforms to ‘come in and register’ under the national securities exchange (NSE) framework. Yet, at the same time, you have failed to provide a path that allows digital asset trading platforms to register.” With HFS Committee member Rep. Warren Davidson (R, OH) already threatening Gensler on Twitter with the loss of his job through a new, yet-unseen bill that would restructure the SEC, the stage was set for a combative meeting between HFS Republicans and Chair Gensler.

opening statements

As the hearing began, Chair McHenry called the meeting to order and began with his opening statement (read it) criticizing the SEC Chair on his digital assets “regulation by enforcement” agenda. He also noted that rule-making by the SEC had doubled under Gensler’s leadership. And he concluded with a condemnation of Gensler’s lack of response to Congressional Republicans requests of the SEC for information related to FTX and other issues. .

In her opening statement, Ranking Member Rep. Maxine Waters (D, CA) wasted no time in her opening statement (read it) in defense of Chair Gensler and called the investigations by Republicans as a “sham.” She blamed Republicans for alignment with Wall Street interests and the rejection of climate change rules for investing, hedge fund reforms and what she called deregulation. She applauded Chair Gensler for his strong enforcement of securities laws as it related to crypto.

Next up were Rep. Ann Wagner (R, MO) and Rep. Brad Sherman (D, CA) took brief turns on the far ends of criticism and compliments of Chair Gensler, respectively.

In his opening remarks, Chair Gary Gensler pivoted off a tweet he had carefully made before the hearing with the statue of lawmaker Sam Rayburn in the Rayburn House Office Building. He argued that artificial intelligence (AI) and not crypto was a more important topic as he looked ahead at his purview at the SEC, suggesting roboadvisors will be transformed to name a few of the impacts. The markets should serve investors not the other way around, he said.

See Chair Gary Gensler’s prepared testimony on the SEC website.


HFS Chair McHenry began the question and answer of Gensler around whether Ether was a commodity or a security. Gensler never answered directly as much as Chair McHenry tried even if he did not seem very surprised.

Ranking Member Rep. Waters asked Gensler to explain to Chair McHenry how a security is defined. He indicated it’s a four-part test and provided some detail. Rep. Waters asked if Gensler had the framework he needed to bring crypto into compliance. Unsurprisingly, Gensler said he has what he needs. “I’ve never seen a field (crypto) that is so non-compliant,” said Gensler. Continue reading “Partisan Questioning of SEC Chair Gensler Leads To Few Surprises In HFS Oversight Hearing”

Are Modifications Needed to the Howey Test? It’s Time for the Digital Asset Test

SEC Chair Gary Gensler

At The Financial Markets Quality Conference, hosted by Georgetown McDonough’s Psaros Center for Financial Markets and Policy in D.C., Securities and Exchange Commission Chair Gary Gensler participated in a virtual fireside chat covering everything from payment for order flow to crypto.

Gensler offered no surprises in his crypto-related answers. See the interview on YouTube.

He remains convinced all the regulation is in place with the Howey Test whose foundation was laid by securities laws created in 1933 and 1934 and then “tested” in a case in front of the Supreme Court in the 1946 focused on land sales of Florida orange groves. Ever since, it has served as the basis for understanding “What is a security.”

But, Chair Gensler was talking to a peer with interviewer and Georgetown professor Reena Aggarwal, who Gensler said volunteered as part of President Biden’s transition team for financial regulatory agencies. The dynamic seemed to allow for Ms. Aggarawal to press a bit further. With her crypto questions centered on regulatory needs, she drilled down to the baseline of the Howey Test which required a crisp answer from the Chair.

Continue reading “Are Modifications Needed to the Howey Test? It’s Time for the Digital Asset Test”

Rep. McHenry Tempers Expectations On Imminent Stablecoin Legislation

Rep. Patrick McHenry

Rep. Patrick McHenry (R, NC) was the focal point of Politico’s “Writing the Rules of Crypto” event today at Washington, D.C.’s Hotel Washington.

The congressman clearly wanted to temper expectations on whether a bill on stablecoins could be forthcoming from the House Financial Services committee where he serves as Ranking Member along with Chairwoman Rep. Maxine Waters (D, CA).

Politico reporter Sam Sutton guided the panel discussion and cut right to the chase with McHenry asking him, “What’s the hold-up with stablecoin legislation?”

McHenry launched in eagerly saying, “A lot.  First, it’s an election year – big policymaking in an election year is hard.” Then, he provided a brief history on why regulatory guardrails were needed as well as revealing the influence of state stablecoin legislation – in particular, New York’s – which has helped inform the work undertaken thus far by the Financial Services committee in coordination with the Fed and Treasury.

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Senator Thune Talks Controls on SEC Purse and Personnel

Senator John Thune

This morning in Washington, D.C., Senator John Thune (R, SD), the Senate Minority Whip, spoke on a variety of investment topics circulating through Capitol Hill at a Punchbowl News event sponsored by American Investment Council.

With mid-term elections less that two months away Thune remained sanguine about Republican prospects to overtake the majority in the Senate.

Nothing was mentioned about his recent co-sponsorship of the bipartisan Digital Commodities Consumer Protection Act, which gives regulatory authority over bitcoin and ether to the Commodity Futures Trading Commission (CFTC).

But, he did speak about general dissatisfaction with recent practices of securities regulators – namely the Securities and Exchange Commission led by Biden Administration appointee Gary Gensler, its Chair.

Overall, the SEC’s commission tilts Democratic with a 3-2 edge.

Thune was interviewed by Punchbowl News Founder, Anna Palmer and elaborated on the dynamics between the SEC and Republicans today.

Continue reading “Senator Thune Talks Controls on SEC Purse and Personnel”

Senator Lummis Asks For Disclosure Requirements From SEC’s Gensler Before Next Congress

Senator Lummis

It was a relatively brief interaction, but in engaging with SEC Chair Gary Gensler at his Senate Banking Committee hearing last week, Sen. Cynthia Lummis (R, WY) provided an update on her bipartisan Responsible Financial Innovation Act (RFIA) co-sponsored with Sen. Kirsten Gillibrand (D, NY).

Senator Lummis also generated news about the SEC’s crypto disclosure requirements.

View at 1 hour 36 minutes of the video for Thursday’s hearing on oversight of the SEC.

Lummis told SEC Chair Gensler that she and Sen. Gillibrand expect to re-introduce the bill early in the new Congress next year.

In order to meet that deadline, she asked that Chair Gensler and SEC staff work with her and Gillibrand on Section 301 of the bill to understand the necessary disclosures required by digital asset companies.

Throughout the brief interaction, Sen. Lummis made multiple mentions of her Democratic colleague’s involvement appearing to signal to the Democrat Gensler, who was appointed by a Democratic administration, that this isn’t just a Republican initiative.

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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.

Continue reading “Will SEC Chair Face Scrutiny From Democrats”