FTX asked about, but did not receive special exemption from SEC

Quick Take

  • Sam Bankman-Fried and other FTX executives met with the SEC to discuss no-action treatment around digital asset broker-dealing, but the SEC did not grant a request.
  • It’s also not clear a request was made by FTX. 

FTX and former CEO Sam Bankman-Fried talked to the Securities and Exchange Commission about a no-action letter, an SEC record of a meeting between the embattled former executive and senior agency staff shows.

The agency did not grant a no-action, both according to a search of the SEC’s public archive of such letters and a statement the SEC made to The Block.

The SEC and other regulators can provide written promises not to pursue enforcement actions over specific activities, so long as those activities don’t violate existing laws and follow other parameters set by the regulator.

The request came in the context of a meeting that took place on March 23, according to a document posted on the SEC’s website. FTX’s general counsel, Ryne Miller, and FTX US’ head of policy and regulatory strategy, Mark Wetjen, joined Bankman-Fried in the meeting with two of SEC Chair Gary Gensler’s senior staffers. Gensler himself met virtually for 30 minutes with Bankman-Fried and the FTX executives on March 29, according to his public calendar. 

The executives and SEC staff discussed “custody of digital asset securities by special purpose broker-dealers, including the unique risks associated with custody of digital asset securities,” in addition to the discussion about the possibility of a no-action letter, the meeting notes show. In 2019 the agency issued guidance around digital assets for broker-dealers, and that guidance was amended in 2021. 

Wetjen did not respond to multiple inquiries for comment. Senior staff for stock exchange IEX, including co-founder and CEO Brad Katsuyama, were also present for the meeting. FTX announced an investment in IEX on April 5. 

"We engaged with [the SEC] to better understand their view of the regulatory paradigm that should apply to the digital asset securities space," an IEX spokesperson said. "At no time have we sought, nor did the SEC ever suggest that any entity could or should be given, special treatment.”

"Because the topic came up in the meeting, a memo was added to the comment file,” an SEC spokesperson told The Block while confirming that the request was not granted.

In 2019 the agency granted a no-action request to TurnKey Jet, a private jet company over the ICO of a utility token for chartering private flights. The grant from the SEC was on the condition that TurnKey Jet possess a fully developed network and app for the token before its sale, and that any funds raised from the token could be usable on day one of issuance.

The SEC in 2020 issued a broader no-action letter for broker-dealers operating trading systems for digital assets, laying out conditions where staff would not recommend an enforcement action. 


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Still, the FTX meeting attracted the attention of online crypto advocates and SEC critics.

In a Nov. 10 tweet, Rep. Tom Emmer, R-Minn., charged Gensler with working with Bankman-Fried and FTX on  “legal loopholes to obtain a regulatory monopoly.” His colleague on the House Financial Services Committee, Rep. Warren Davidson, R-Ohio, also criticized the SEC's "selective enforcement.”

Tyler Gellasch, the head of pro-financial regulations nonprofit Healthy Markets and a one-time aide to former SEC Commissioner Kara Stein, downplayed the meeting.

“Nothing about somebody coming in and asking for a no-action letter is unusual,” he said. “What’s unusual is that someone from the digital asset industry came in and met with the SEC as opposed to their more favored regulator, the CFTC.”

Gensler has voiced reservations over legislation Bankman-Fried supported that would give the Commodity Futures Trading Commission more power over digital asset rulemaking and oversight. Decentralized finance advocates are suspicious of the bill as favoring current centralized exchanges. Financial regulators and Treasury Secretary Janet Yellen have recommended stronger rulemaking around digital assets that qualify as commodities, like bitcoin, and more direct regulatory oversight over exchanges that manage trades in them, which the bill intends to do.

Senate Agriculture Committee Chair Debbie Stabenow, D-Mich., and top committee Republican Sen. John Boozman, R-Ark., have both pledged to move forward on the legislation in the wake of FTX’s collapse. 

 With additional reporting by Stephanie Murray.

Update: This story has been updated to reflect that SEC Chair Gary Gensler met virtually with Sam Bankman-Fried and FTX executives on March 29. 

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

About Authors

Colin oversees and contributes policy, regulatory, political, and legal coverage for The Block. Before joining The Block he covered congressional economic policy, including fintech legislation, for Bloomberg Industry Group and Politico, with additional stints at the Washington Examiner and American Banker. Colin is an alumnus of Columbia University's Graduate School of Journalism and Sewanee: The University of the South. 
Kollen Post is a senior reporter at The Block, covering all things policy and geopolitics from Washington, DC. That includes legislation and regulation, securities law and money laundering, cyber warfare, corruption, CBDCs, and blockchain’s role in the developing world. He speaks Russian and Arabic. You can send him leads at [email protected].


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