US Polls 2024: Crypto industry expects smooth ride as Gensler’s departure at SEC promises regulatory change under Trump regime

The crypto industry has invested millions of dollars in presidential and congressional races, but its most notable election victory will likely be the departure of U.S. Securities and Exchange Commission Chairman Gary Gensler.

The former Goldman Sachs banker has led the toughest regulatory crackdown on the digital assets sector, launching dozens of lawsuits against crypto companies and traders large and small, including financial giants Coinbase Global Inc. and proprietary trading company DRW Holdings LLC.

President Donald Trump’s decisive victory ensures a rollback of crypto-related measures once he takes office. In July, Trump pledged to fire Gensler on the first day of his second administration while headlining a Bitcoin conference in Nashville.

The SEC has often touted its success in court in winning rulings that align with its view that decades-old securities laws apply to the new digital asset class. Significant fines have also been imposed on some of the biggest names in the industry. In April, the agency obtained a massive $4.5 billion fine and restitution from Terraform Labs, a stablecoin issuer and its founder Do Kwan. The agency has not yet published its annual report on the implementation of the measures taken for the 2024 financial year. However, the previous year, the agency had filed 46 files of this type, an increase of more than 50%. compared to the previous year, according to a report from consulting firm Cornerstone Research.

“Some crypto cases are legitimate fraud cases and I hope that continues and I hope we get more of them,” said JW Verret, a professor at George Mason University’s Antonin Scalia Law School in Arlington. , in Virginia. “Many cryptography cases are all about recording, cases of foot fault where recording is impossible.”

The next SEC chair is expected to advance new regulations that will change existing securities laws or allow digital asset companies to comply with rules that Gensler has long criticized them for flouting. This will also serve to curb law enforcement.

Bipartisan crypto legislation that supports this goal is now a stronger prospect, with the Senate expected to be under Republican control.

“We expect the approach of the Trump administration and the new Congress to crypto regulation to be much more constructive,” said Jack Inglis, chief executive of the Alternative Investment Management Association, a trade group based in London representing hedge funds and private equity firms. .

This means policies “recognizing the need to integrate crypto into the broader framework of financial services while accounting for technological differences with traditional finance, leading to a more personalized approach in many areas,” he said. he declared.

The SEC’s enforcement proceedings against crypto companies have focused on whether their products fit the decades-old definition of a security, as outlined in the U.S. Supreme Court’s opinion. United SEC v. WJ Howey Co. This has not been a good approach, according to William McLucas, former SEC director of enforcement, now a partner at WilmerHale. McLucas spoke at a securities enforcement conference in Washington on Wednesday.

“This can’t be the solution, because whether you like crypto or not, it’s not going away,” McLucas said. “The lawsuits that have been filed are what they are, but they continue to bring them, and we continue to see crypto products,” he said.

Digital assets were the focus of 18% of all whistleblowers, complaints and enforcement referrals to the agency in fiscal year 2024, the regulator’s inspector general said in a recent report. The agency’s Office of Investor Education and Advocacy received nearly 6,000 such complaints during the same period, more than double any other type of complaint, the IG said.

Gensler Departure

Despite Trump’s promise to oust Gensler from office immediately, it could come down to the SEC chairman resigning before Inauguration Day. Some of Gensler’s most vocal critics in the financial services space are already calling for his immediate resignation.

“Last night, the people voted to take this country in a new direction, and Chairman Gensler should respect that vote by immediately resigning from his position,” said Chris Iacovella, president and CEO of the American Securities Association, which represents regional brokers. and other financial services companies.

If Gensler follows Washington tradition and leaves, it would leave the agency split 2-2 along party lines until a new chairman can be confirmed. This would prevent more aggressive enforcement, especially with Hester Peirce, nicknamed “Crypto Mom,” still commissioner.

A crypto industry executive, who asked to speak candidly, said he anticipates Gensler may still want to file complaints against companies like Uniswap and OpenSea that have already received “Wells notices” – an application process formally notifying a company that it is under investigation by the SEC.

But other application folders might be slowed down. Agency staff, aware that a new SEC chairman, particularly one who supports Trump’s promise to shrink the size of the federal government, could look unfavorably on employees who take aggressive action in the months leading up to a change in leadership and policy, the industry official said. .

The SEC declined to comment.