Despite a recent string of judicial failures, US Securities and Exchange Commission Chair Gary Gensler remains adamant that his agency should be in charge of crypto — and wants to tell lawmakers the same on Sept. 12.
The securities regulator has lost out to both Grayscale and Ripple in the previous two months, which is considered a severe setback to the agency. However, in his prepared statement for the Senate Banking Committee meeting, Gensler will restate his belief that cryptocurrency assets are securities and should be regulated by his agency. The Senate hearing will focus on the SEC’s oversight of specific issues.
“Given this industry’s widespread noncompliance with securities laws, it’s not surprising that we’ve seen so many issues in these markets.” This story has been told before. “It’s reminiscent of what we had before federal securities laws were enacted in the 1920s,” states Gensler’s prepared testimony.
In keeping with a recurring theme, Gensler said that almost all crypto assets pass the Howey Test — a legal test that evaluates whether or not an asset or transaction can be classified as a security.”The vast majority of cryptocurrency tokens are likely to meet the investment contract test. “Because most crypto tokens are subject to securities laws, most crypto intermediaries must also comply with securities laws,” Gensler stressed. After ruling partially in favor of Ripple, Judge Analisa Torres handed down the SEC’s first big legal loss on July 13. Judge Torres determined that selling XRP tokens to ordinary customers did not violate federal securities laws.
While the SEC is presently appealing this ruling, it is predicted that many other crypto companies facing SEC charges will reference it in their own dismissal applications.
The SEC suffered its second big loss against Grayscale on August 29 following the previous denial of its request to convert its over-the-counter Bitcoin Trust into a Bitcoin exchange-traded fund (ETF). The judge stated unequivocally that the SEC’s denial of Grayscale’s motion was “arbitrary and capricious.”
These high-profile losses appear to have prompted an appeal by the blockchain-based payments network LBRY, which was found guilty of securities law violations in July.
On September 7, LBRY filed a notice of appeal against the judgment, reversing its previous intention to wind down and indicating that the company would fight the court ruling that sided with the SEC.