Gary Gensler Criticized as 'Most Destructive' SEC Chairman in History

SEC Chairman Gary Gensler Faces Fierce Criticism from Lawmakers and Internal Affairs Over Cryptocurrency Crackdown at Sept. 24 Hearing

In a five-hour hearing before the U.S. House of Representatives Financial Services Committee on Sept. 24, U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler faced harsh criticism from both lawmakers and members of his own agency over his handling of regulation of the cryptocurrency industry.

Republican Congressman Tom Emmer called Gary Gensler the most destructive and lawless SEC Chairman in the agency's 90-year history. Emmer criticized:

"You have arbitrarily created the term crypto asset security. It is not in any regulations and your SEC has never provided specific guidance on how to define them. Your inconsistency on this issue has set the country back. We have never had a more destructive and lawless SEC Chairman,"

According to Emmer, this term has become the basis for Gensler's "crackdown" campaign against many crypto companies in recent times, including Coinbase, Binance, Kraken and Ripple.

One of the hot spots mentioned in the hearing was the SEC's lawsuit against the crypto company DEBT Box. The case was later dismissed by the court in May 2023 and the SEC was forced to pay $1.8 million in legal fees.

Tom Emmer took the opportunity to criticize Gary Gensler, accusing SEC lawyers of “fabricating a series of lies” to carry out Gensler’s anti-crypto campaign. Emmer also made it clear that this had severely damaged the SEC’s image and reputation.

In response to Emmer’s criticism, Gensler only admitted: “The issues in that case were not handled well.”

Even within the SEC, Gensler faced disagreement. SEC Commissioner Hester Peirce, a supporter of the crypto industry, also criticized the SEC’s use of the term “crypto asset security.” Peirce said:

“The SEC should have acknowledged earlier that tokens themselves are not securities. We failed as a regulator by not providing clarity.”

Rep. Tom Emmer also questioned Gensler about Vice President Kamala Harris's comments about supporting innovative technologies like AI and digital assets while protecting consumers and investors.

When asked if Gensler agreed with Harris's views on creating a safe trading environment with transparent regulations, Gensler responded that the laws are in place but that Congress can change them if it deems necessary.

Based on the SEC's definition of tokens as securities, a representative also compared buying Yankees tickets to buying NFTs and asked Gensler whether sports tickets are securities when they only provide access to the stadium, similar to NFTs that provide access to project features. The question arose after the SEC sued Stoner Cats for allegedly offering unregistered securities through NFTs.

Gensler explained that: "It depends on how the product is offered and whether the buyer has expected returns, based on The Howey Test."

Gensler is now facing increasing pressure to crack down on the crypto industry after being criticized for failing to prevent a series of major crashes in 2022 such as Terraform Labs, Celsius and FTX. His tough measures, typically the SAB 121 regulation, have met with strong opposition. Many analysts predict that Gensler may step down in 2025, and some US lawmakers have even called for SEC reforms and his removal as chairman.