Crypto Lawyers Push Back on SEC Chair’s Claims of Crypto Regulation
Cryptocurrency lawyers are pushing back on Gary Gensler's recent comments that every cryptocurrency, except Bitcoin, is a security.
Recently, Gary Gensler, the Chair of the United States Securities and Exchange Commission (SEC), commented in a New York Magazine interview that every cryptocurrency except Bitcoin is a security that falls under the SEC’s jurisdiction.
In response, several cryptocurrency lawyers have pushed back, saying that the SEC has no legal standing to regulate the crypto space.
Gensler’s claims and rebuttals
In the interview, Gensler stated that “everything other than Bitcoin” falls under the SEC’s remit, explaining that other crypto projects “are securities because there’s a group in the middle, and the public is anticipating profits based on that group.”
However, Jake Chervinsky, a lawyer and policy lead at the crypto advocacy group the Blockchain Association, argued in a tweet that Gensler’s “opinion is not the law,” despite his claimed command over the crypto sector. Chervinsky added that “until and unless” the SEC “proves its case in court” for its jurisdiction over each token “one at a time” then it “lacks authority to regulate any of them.”
Chair Gensler may have prejudged that every digital asset aside from bitcoin is a security, but his opinion is not the law. The SEC lacks authority to regulate any of them until and unless it proves its case in court. For each asset, every single one, individually, one at a time.
— Jake Chervinsky (@jchervinsky) February 26, 2023
Logan Bolinger, another lawyer, echoed Chervinsky’s sentiment in a tweet, saying that Gensler’s opinions on what is or isn’t a security are not legally dispositive, meaning they are not the final legal determination.
“Judges – not SEC chairs – ultimately determine what the law means and how it applies,” Bolinger added.
Friendly reminder that Gensler’s opinions on what is or isn’t a security are not legally dispositive.
In this country, judges – not SEC chairs – ultimately determine what the law means and how it applies.
Doesn’t mean his thoughts are irrelevant. They’re just not dispositive.
— Logan Bolinger (@TheWhyOfFI) February 26, 2023
Gabriel Shapiro, the general counsel at investment firm Delphi Labs, outlined in a series of tweets the seemingly impossible enforcement that the SEC would have to carry out on the industry to cement its rule.
Shapiro said that over 12,300 tokens worth around $663 billion are – according to Gensler – unregistered securities that are illegal in the U.S. The agency would have to file a lawsuit against each token creator, which would mean 12,305 cases.
so far, SEC has handled tokens in mainly 2 ways:
(1) fine + registration requirement–this failed every time so far, with the companies becoming bankrupt
(2) fine + order to destroy all premined tokens and delist tokens from all exchanges
both ways, tokens go to $0
He argued that SEC registration is not only too expensive for most token creators, but there is also no clear path for registering tokens.
Potential consequences of SEC’s claims
The policy lead at advocacy body Bitcoin Policy Institute, Jason Brett, said Gensler’s comments “shouldn’t be celebrated, but feared” and stated that “there are ways to win other than via a regulatory moat.”
Many in the crypto space have expressed concern that the SEC’s claims could stifle innovation and investment in the industry, as token creators would be forced to spend large amounts of money on registration or face fines and delisting.
While Gensler’s claims have sparked controversy in the crypto space, how the SEC will move forward with regulation remains to be seen. The agency has previously taken action against companies and individuals in the industry, but the sheer number of tokens and projects in the space could make enforcement difficult. For now, crypto lawyers and industry experts will continue to monitor developments and push back against regulatory overreach where necessary.