Growing Number of Democrat Lawmakers Critical of the SEC

We don’t play partisan politics and we have stated repeatedly that the US Securities and Exchange Commission needs different tools – if not leadership – to provide better clarity to the crypto industry. One fallout we didn’t expect from the FTX collapse is more lawmakers, particularly Democrats, are joining together in favor of the crypto industry and for regulatory reform. From The Block:

As Congress weighs the FTX collapse, Democrats appear split on how much more the Securities and Exchange Commission and its chair, Gary Gensler, could have done to stave off what the agency now calls “massive, years-long fraud.”

The scandal has exposed an already growing intra-Democratic split over the agency’s approach to digital assets. While progressives and crypto-skeptic Democrats continue to back Gensler in his stance that almost all crypto firms operate outside of existing law, some Democrats have begun to publicly question the agency’s priorities.

The split could complicate legislation on digital assets, as well as increase pressure on Gensler, who already faces scrutiny on a broad array of issues from Republicans, who will hold a majority in the House of Representatives in the next Congress.

The critics

“SEC Chairman Gensler has repeatedly claimed that most cryptocurrencies are covered by existing securities laws. Despite that, the SEC has not proposed a single rule to create guardrails for digital assets,” said Rep. Josh Gottheimer, D-N.J., during last week’s House Financial Services Committee hearing on FTX. “They failed to do their job, and they failed to protect consumers.”

Rep. Ritchie Torres, D-N.Y., also criticized Gensler to reporters after the hearing.

“Mr. Gensler’s been in office for two years and he has not enacted a single rule that would bring greater transparency or accountability to the crypto sector,” Torres said. “I’ve heard him express skepticism, but he’s not paid to be a commentator on crypto; he’s paid to be a regulator on crypto.”

Torres, who accepted approximately $14,500 in campaign donations from Sam Bankman-Fried and his brother in this election cycle, wrote a letter criticizing the agency’s approach on Dec. 6 in which he also asked for the Government Accountability Office to review of the SEC’s approach to digital assets.

“There should be an independent review of whether the SEC did thoroughly investigate FTX,” continued Torres. “It may be the case that the SEC did everything it could, so there’s nothing to fear from an independent review, the GAO is apolitical and it would certainly benefit us as legislators as we craft policies in relation to crypto.”

The Bronx Democrat added that he planned to return his FTX-tied donations.