Gensler says securities law is time-tested, crypto just needs to fall in line

Quick Take

  • SEC Chair Gary Gensler said that his agency’s job is to “ensure that a number of your readers, maybe even your owners, come into compliance with the securities laws,” in an interview.
  • U.S. regulators differ about whether or not ether is a security or a commodity, the definition of which determines its legal treatment in the country. 

Securities and Exchange Commission Chair Gary Gensler continued to hint that ether, among other crypto tokens, may face increased scrutiny as an unregistered security. And with securities laws time-tested, the industry better get in line.

“If the public is anticipating profits based upon the efforts of others in a common enterprise, those are the indicia of a security,” Gensler said when asked by The Block why he declined to directly weigh in on whether the second-largest cryptocurrency by market capitalization is a security or a commodity. 

“Overall, these token operators they generally have websites, they generally have a group of individuals that are updating software, they often have Twitter accounts, they often hire lawyers, they often lobbyists who come and meet with members of the SEC and members of congressional staff,” Gensler said. “It kind of belies logic that there’s not some common group of promoters that are in the middle of this.”

The Republican chair of the House Financial Services Committee, Patrick McHenry, earlier pressed the SEC chair to provide more clarity on the topic, a seeming friction point between Gensler and fellow markets regulator Rostin Behnam, the chair of the Commodity Futures Trading Commission. In a recent enforcement action against crypto firm KuCoin, New York Attorney General Letitia James asserted that ether is an unregistered security, possibly opening Ethereum co-creator Vitalik Buterin and other early developers up to legal liability. 

“Give me a break, come on,” said McHenry during repeated attempts to get Gensler to provide further detail on ether. “There’s a lack of clarity here, can you at least agree with that?” 


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'Clarity' in crypto

Gensler spoke to reporters following Tuesday’s hearing before that committee, during which he received a lengthy grilling from Republicans on digital assets, among other issues, as well as the occasional critical question from committee Democrats.

Asked by The Block whether more direct guidance on ether might make sense given conflicting views from policymakers on the cryptocurrency, including from a former SEC divisional head, Gensler responded that “this is a field that has clarity and mistakenly attempts to ignore it.” 

“The time-tested securities laws really are time-tested,” added Gensler. “And that’s why we need to ensure that a number of your readers, maybe even your owners, come into compliance with the securities laws.”

© 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 Author

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. 


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