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SEC’s Gary Gensler Believes AI Can Strengthen its Enforcement Regime

Gary Gensler, the chair of the United States Securities and Exchange Commission (SEC), recently expressed his belief that artificial intelligence (AI) could greatly benefit the agency’s staff. During a speech at the National Press Club on July 17, Gensler discussed the potential use cases of AI that could assist the SEC in its role as a securities watchdog.

Gensler acknowledged the SEC’s need for greater implementation of AI in areas such as market surveillance, disclosure review, exams, enforcement, and economic analysis. He emphasized that AI could bring about tremendous opportunities for humanity, with significant positive impacts on various sectors including finance.

The SEC’s enforcement actions against cryptocurrency firms have been on the rise, with at least 54 such firms being targeted between 2018 and the first half of 2023. Notably, the collapse of FTX in November led to a sharp increase in the rate of these actions.

While Gensler did not provide specific details on how the SEC would employ AI, he expressed his admiration for the technology’s transformative potential. He compared its significance to that of the internet and mass production of automobiles, highlighting its ability to create efficiencies across the economy.

However, Gensler also acknowledged the lingering issues associated with AI. He raised concerns about bias, deception, privacy infringements, and conflicts of interest within AI systems. Historical biases embedded in predictive AI models, for instance, can compromise accuracy and lead to false predictions. Gensler even shared his personal experience of falling victim to misinformation when a fake AI-generated resignation text began circulating online.

To address potential conflicts of interest, Gensler called upon SEC staff to propose rules that prioritize the interests of customers over those of companies. He further cautioned about the emergence of AI monopolies, which could disrupt the economy and potentially contribute to future financial crises.

In a subsequent interview with Yahoo Finance, Gensler affirmed the SEC’s commitment to combating fraudulent activities involving AI. He emphasized that fraud remains fraud, and if bad actors employ AI to deceive the public, the SEC is both authorized and mandated by Congress to take action against them.

Gary Gensler’s endorsement of AI as a powerful tool for the SEC underscores the growing importance of this technology in the regulatory landscape. As the SEC continues to adapt to the evolving market, the use of AI is expected to enhance the agency’s effectiveness in safeguarding investors and maintaining fair and transparent financial markets.


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