United States Securities and Exchange Commission Chair Gary Gensler is undaunted by a string of recent legal losses. Gensler intends to inform Congress of this on Sept. 12 and is unwavering in his belief that his organization should be in charge of crypto.
The securities regulator suffered significant setbacks in the last two months when it lost to both Ripple and Grayscale.
However, Gensler will reaffirm the idea that crypto assets are, in fact, securities and should be governed by his agency in his prepared testimony for the Senate Banking Committee hearing. Regarding the SEC’s oversight of specific issues, the Senate is holding a hearing.
Given the wide-ranging noncompliance of this industry with the securities rules, it is not unexpected that there have been many issues in these markets. This narrative is not new. As stated in Gensler’s prepared testimony, it is similar to what existed in the 1920s before federal securities laws were established.
Gensler continued his recurring theme by claiming that almost all crypto assets pass the Howey test, which is a legal standard used to establish whether or not an asset or transaction qualifies as a security.
The investment contract criteria is probably met by the great majority of cryptocurrency tokens.
It follows that the majority of crypto intermediates must adhere to securities rules as well as the majority of crypto tokens are governed by securities regulations, Gensler continued.
The SEC suffered its first significant legal setback on July 13, when Judge Analisa Torres partially sided with Ripple. According to Judge Torres, selling XRP coins to retail customers did not violate any federal securities laws.
Although the SEC is currently working to appeal this ruling, it is anticipated that many other cryptocurrency companies facing lawsuits from the government will make reference to it in their own dismissal applications.
Having previously denied Grayscale’s proposal to transform its over-the-counter Bitcoin Trust into a Bitcoin exchange traded fund (ETF), the SEC suffered its second significant setback against Grayscale on August 29. The SEC’s denial of Grayscale’s motion, in the judge’s opinion, was “arbitrary and capricious.”
The blockchain-based payments network LBRY, which was found guilty of breaking securities regulations in July, appears to have filed an appeal in response to these well-publicized losses.
On September 7, LBRY filed a notice of appeal against the verdict, going against its earlier decision to wind down and indicating that it would prefer to contest the court’s decision to side with the SEC.
