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Shots Fired: SEC Chief Gary Gensler Faces Tough Questions Over Crypto Enforcement Action
- SEC Chair Gary Gensler faced bipartisan criticism during a House Financial Services Committee hearing over the agency’s approach to regulating crypto.
- Democrat Ritchie Torres challenged Gensler on how the SEC defines securities, using Yankees tickets and NFTs as examples.
- Gensler was seemingly unable to answer the question and only referenced the Howey Test for clarification.
- Republican Majority Whip Tom Emmer heavily criticised Gensler over a mishandled case involving crypto startup DEBT Box.
US Securities and Exchange Commission (SEC) Chair Gary Gensler was heavily criticised by both political parties for his approach to regulating the cryptocurrency industry.
In a heated House Financial Services Committee session on Tuesday, Gensler was grilled—or, more accurately, burnt to the ground—as politicians and legislators questioned the SEC’s policies on crypto and securities laws infringement.
Related: US Federal Judge Grills SEC Over Refusal to Define Simple Questions About BTC, ETH
Grill The Man
Republican Majority Whip Tom Emmer was among the first to question Gensler, specifically about the SEC’s handling of a case involving crypto startup DEBT Box, a company offering blockchain mining software licences.
So, in 2023, the SEC filed a lawsuit (something they love doing) against the company because it was allegedly involved in a US$50M (AU$72.4M) fraud scheme and eventually got a temporary restraining order (TRO).
But it turns out that the SEC had misrepresented evidence to obtain the TRO. In March of 2024, a federal judge in Utah described the agency’s action as being in “bad faith” and ultimately ordered the agency to pay a sanction of US$1.8M (AU$2.6M).
The judge also condemned the SEC’s misleading statements, to which the agency admitted shortcomings.
“Does the fact that we’re talking about this today even slightly embarrass you?” Emmer asked Gensler, who acknowledged, “The matters in that case were not well handled.”
In another exchange, Democrat Ritchie Torres questioned Gensler on how the SEC defines securities, using the example of a New York Yankees ticket. He inquired whether selling a Yankees ticket would be considered a security, drawing a parallel to NFTs, referencing a recent SEC charge against Stoner Cats 2 LLC for an unregistered NFT offering.
Gensler clarified that it depends on how an asset is offered and sold, referring to the Howey Test, a standard used to determine if an asset qualifies as a security.
Meanwhile, Gensler is also going against NFT companies, like OpenSea, which received a Wells notice, an action that was deemed ridiculous and outrageous by the crypto community.
Heated Debate as Crypto Takes on US Politics
The hearing took place as crypto regulation became a significant issue in the upcoming US presidential elections.
Crypto firms spent over US$119M (AU$172.5M) in 2024, primarily through super PACs like the Fairshake PAC, of which Coinbase and Ripple are some of the biggest contributors, having donated around US$23.5M (AU$34M) and US$23M (AU$33.3M), respectively.
Something that highlights crypto’s political instrumentalisation is the fact the industry is seeing “support” from both political parties.
For instance, it’s now more official that Harris supports crypto and AI, apparently, after the Democratic candidate made her first comments about digital assets and emerging technologies during a Manhattan fundraiser.
Related: Harris Now Reportedly Supports AI, Crypto, Community Has Mixed Feelings
She stated that they will “encourage innovative technologies like AI and digital assets while protecting consumers and investors”.
Author
José Oramas
José is a journalist and translator with a keen interest in blockchain and cryptocurrencies.
