SEC Chair Gensler Ups the ‘Regulation by Enforcement’ Effort Against Crypto

In the news and PR business, you publish things you want buried on any given Friday night. This column, authored by SEC Chair Gary Gensler, was published by the Wall Street Journal on Friday night. Probably for the best.

It’s really not worth digging too deeply into as it’s full of platitudes and empty comparisons, more empty calories than anything. His bottom line though seems to be that pretty much anything in the crypto space is a security, and thus under his jurisdiction.

But if you read between the lines you’ll see the inherent threat he is making, and that his view of how regulations should work is 180 degrees away from anything resembling fair and just.

As I said in a speech last year, “Make no mistake: If a lending platform is offering securities, it . . . falls into SEC jurisdiction.” On many occasions, the commission and state regulators have addressed how the relevant case law implicates crypto assets, including crypto lending.

There are costs of complying with securities laws, just as there are costs to car makers of adding seat belts. Platforms that offer crypto lending need to comply anyway, not merely because that’s the law, but also because it helps protect investors and increase trust in our markets.

Fortunately, there is a path forward. We encourage platforms offering crypto lending to come in and talk to SEC staff. Getting these platforms into compliance with the securities laws will benefit investors and the crypto market.

We believe the idea that crypto innovators must come to the SEC and seek permission reinforces the narrative that the SEC is engaging in “regulation by enforcement.” That’s not how it is supposed to work. Even if you accept for argument the idea that almost all crypto offerings are securities and not private currency, the idea is that the SEC is supposed to offer clear and plain guidance out in the open.