SEC Urged to Establish Clear Guidelines Amidst Concerns Over ‘Regulation by Enforcement’

By Jody McDonald November 07, 2023 In Regulation, SEC
Image: Shutterstock
  • SEC Commissioner publicly shares his view that enforcement actions are an ineffective approach to regulating the crypto market.
  • Commissioner encourages SEC to offer rules-based guidance to market participants to improve transparency.
  • SEC’s ongoing struggle to regulate crypto further hampered by hiring rules around employing people invested in crypto.

Republican SEC Commissioner Mark T. Uyeda has expressed his disappointment over the agency’s approach to cryptocurrency and called for a move away from regulation by enforcement, in a speech delivered in London on Monday at the 2023 Conference on SEC Enforcement Outside the United States.

Commissioner Calls For Change In Crypto Regulation

In his speech, Commissioner Uyeda said enforcement is not a good approach to regulation as it fails to give market participants clarity in advance, adding that one of the SEC’s primary responsibilities is to provide advance guidance to market participants.

“Let’s be clear about it – enforcement actions are not well-suited for providing guidance. By their very nature, enforcement actions are post hoc actions. However, one of the primary responsibilities of a regulator is to set clear expectations on permitted and prohibited conduct in advance so that law-abiding market participants can comply ex ante.”

Mark T. Uyeda, SEC Commissioner

Uyeda said he believes the SEC should instead be proposing rules and guidance around cryptocurrencies. He lamented the fact that despite proposing a large number of new rules over the past two years, the SEC has yet to propose any new rules or guidance specifically related to cryptocurrencies.

Uyeda pointed out a double standard that will be familiar to most in the crypto community:


Market participants should not be engaged in a game of chance – waiting for rules to be retroactively reinterpreted to include their conduct and then being subject to an investigation years later. The SEC requires disclosures and transparency from market participants. Perhaps the SEC owes that same level of transparency to the market with respect to how it interprets its own rules.”

Mark T. Uyeda, SEC Commissioner

SEC Faces Ongoing Struggle With Crypto

Recently, the SEC’s regulation by enforcement approach has hit a few hurdles — most notably its case against Ripple, which was partially ruled in Ripple’s favour in July. Since then courts have also ruled that the SEC cannot appeal the partial ruling in the Ripple case and the SEC’s charges against Ripple CEO and Executive Chairman have also been dropped.

Following this string of legal losses for the SEC, prominent Ripple supporter and lawyer John Deaton tweeted that he believes the legal rulings in the case so far amount to a 90% win for Ripple, adding that if Ripple can settle what remains of the case against it for under US $20 million (AU $31 million) it’ll amount to a 99.9% win.

In addition to its enforcement issues, the SEC is also having trouble recruiting staff with expertise in cryptocurrency.

The SEC’s annual Office of the Inspector General’s (OIG) report found that a small talent pool and competition from the private sector are factors hindering recruitment, but ironically, the agency’s policy of excluding applicants with crypto holdings is further complicating things.

“This prohibition, according to SEC officials, has been detrimental to recruiting, as candidates are often unwilling to divest their crypto assets to work for the SEC.”

2023 SEC OIG Management and Performance Challenges report

The OIG plans to examine SEC recruiting practices in more detail in 2024.

Jody McDonald

Jody McDonald

Jody is a Brisbane-based freelance writer who specialises in writing about business, technology, and the future of work.

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