Lawyers weighed in on Gary Gensler’s crypto regulation claims, saying the SEC has no legal basis to oversee the space.
Crypto lawyers reject comments made by the president
Cryptocurrency lawyers have dismissed comments made by the head of the United States securities regulator, who claimed in a recent interview that every cryptocurrency other than Bitcoin is a security within its jurisdiction.
In a wide-ranging New York Magazine interview discussing crypto on Feb. 23, SEC chairman Gary Gensler claimed that ‘anything other than Bitcoin’ falls within the agency’s remit.
Gensler in @NYMag on crypto:
-everything is a security except bitcoin
-every company out there is in violation
-crypto is pointless but blockchain is kinda neatHard to argue you’re acting in good faith if admittedly trying to stamp out an entire industry. pic.twitter.com/Ozw8ZJ3ETO
— Alexander Grieve (@AlexanderGrieve) February 26, 2023
He added that other crypto projects are “securities because there is a group in the middle and the public expects profits based on this group,” which does not apply to Bitcoin, he said. However, Jake Chervinsky, a lawyer and policy leader at crypto advocacy group Blockchain Association, argued in a tweet on Feb.
He added that the SEC’s jurisdiction over each token is ‘until and unless it proves its case in court’, ‘one at a time’, then ‘it has no authority to issue any of them’. Attorney Logan Bolinger also tweeted on February 26 that “Gensler’s views on whether or not securities are legally decisive.” It also means that there is no final legal determination.
Sue token creators
Meanwhile, Gabriel Shapiro, general counsel at investment firm Delphi Labs, outlined in a series of tweets the seemingly impossible sanction the SEC would have to impose on the industry to solidify its rule.
Shapiro said that more than 12,300 tokens, valued at approximately $663 billion according to Gensler, are unregistered securities that are illegal in the United States, and that, as Chervinsky points out, the agency would have to file lawsuits against every token creator.
so far, SEC has handled tokens in mainly 2 ways:
(1) fine + registration requirement–this failed every time so far, with the companies becoming bankrupt
(2) fine + order to destroy all premined tokens and delist tokens from all exchanges
both ways, tokens go to $0
— _gabrielShapir0 (@lex_node) February 26, 2023
According to Shapiro, the SEC has dealt with cryptocurrency in two main ways: either by fining the token creators and requiring the issuer to register, or by fines them and ordering the created tokens to be destroyed and removed from exchanges.
“SEC registration is not only too expensive for most token creators, but there is no clear path for token registration,” Shapiro said.
“What’s the plan here? Since registration is not possible, only anyone can pay huge fines, stop working on protocols, destroy all developer front mines and remove them from trading. That means 12,305 lawsuits.”
All crypto transactions are subject to law
Gensler reiterated the view that all crypto transactions other than Bitcoin are subject to securities laws. Gary Gensler’s latest interview with New York Mag (NYMAG) has once again stirred up the crypto industry.
Gary Gensler said in an interview with NYMAG: pretty much every sort of crypto transaction already falls under the SEC’s jurisdiction except spot transactions in bitcoin itself and the actual purchase or sale of goods or services with cryptos, “everything other than bitcoin”.
— Wu Blockchain (@WuBlockchain) February 27, 2023
The SEC chairman reiterated that he considers all assets and all transitions for Bitcoin subject to US securities laws, except for spot trading. While crypto assets are not yet officially classified, Gensler said that ‘everything other than Bitcoin’ is securities. According to him, the people behind all his projects and networks are secretly trying to lure investors into buying the tokens.
