Gary Gensler
SEC Chair Gary Gensler refused to clarify the status of Ether as a security or a commodity during a Congress hearing in 2023. U.S. House Committee on Financial Services YouTube | Oversight of the Securities and Exchange Commission (EventID=115751) U.S. House Committee on Financial Services YouTube Channel/Screenshot

KEY POINTS

  • Committee Chair McHenry said the SEC has transformed into 'a rouge agency' under Gensler
  • Emmer stayed true to his promise of grilling Gensler, calling him the most 'destructive' and 'lawless' SEC Chair
  • Nickel said Gensler's enforcement-actions have stained the Biden-Harris administration

U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler appeared before the House Financial Services Committee Tuesday, again refusing to directly answer questions seeking clarity in the SEC's regulation of digital assets.

The Tuesday hearing looked into the financial regulator's enforcement-first approach toward cryptocurrencies, specifically under Gensler's leadership.

A 'Reckless Agenda' That Even Lawmakers Oppose: McHenry

Committee Chair Patrick McHenry, R-N.C., in his opening statement pointed out how several courts have now taken notice of Gensler's "reckless agenda" in his pursuit of a crypto crackdown.

"Under Chair Gensler, the SEC has become a rouge agency," McHenry said, adding that the Wall Street regulator "routinely exploits its authority" over innovative technologies, affecting the American public's access.

He said it's not just courts that have recognized how the SEC has been mishandling some of its cases against crypto and blockchain firms, particularly mentioning Ripple and Debt Box.

He noted how over 250 members of Congress from both parties have signed dozens of letters "opposing actions taken by the SEC" that have had inadequate justification.

The Most 'Destructive' Chair in SEC History: Emmer

House GOP Majority Whip Tom Emmer, who, ahead of the hearing, promised to hold Gensler's "feet to the fire," lit up the fire as he pointed to the SEC's failed Debt Box case, saying the regulatory chief should be "embarrassed" for the case's outcome.

Emmer slammed the SEC for having taxpayers cover nearly $2 million in legal fees and fines that the SEC was ordered to pay up after a court found that the Debt Box lawsuit was made in "bad faith."

He also blasted Gensler for "making up" the term "crypto asset security," which Emmer said was "nowhere to be found" in the existing laws. "You deliberately used this made-up term as the basis for your entire enforcement crusade over the past three years," Emmer said.

"We could not have had a more historically destructive or lawless chairman of the SEC," he concluded. He also noted that it appears Vice President Kamala Harris, when she spoke for the first time in support of crypto over the weekend, was rebuking Gensler.

No Difference Between Yankee Ticket and NFT: Torres

Rep. Ritchie Torres, D-N.Y., approached his questioning of Gensler in a different light. He asked the SEC chief if buying a Yankee ticket to get access to a Yankee game makes the ticket a security. Gensler stammered, refusing to answer the question directly.

Torres then pointed to the case of Stoner Cats, wherein nonfungible token (NFT) holders were given access to the animated web series. "Is there a legal difference between buying a Yankee ticket that offers you the experience of a Yankee game and buying an NFT that offers you the experience of an animated web series?" Torres asked.

Gensler tried to insist that the issue is based on whether it is offered and sold as an investment contract, to which Torres responded that Gensler was "avoiding the question."

Tainting the Biden-Harris Government: Nickel

Rep. Wiley Nickel, D-N.C., who has been pushing for a Democratic Party "reset" with the crypto space, noted how Gensler's "open hostility towards digital assets is hurting consumers and setting the U.S. behind the rest of the world," and was "hurting the Biden-Harris administration."

Nickel rebuked the SEC Chair for "single-handedly" undermining the current administration on Web3 issues due to his crypto war. He went on to note how there is growing "strong bipartisan support" for bills seeking to establish regulatory clarity for the industry.

He said millions of Americans who hold cryptocurrencies have watched "in shock and disbelief" how the SEC under Gensler has been treating "their investments as illegitimate, undermining their efforts to save for retirement and build innovative blockchain technologies that could drive our economy in the future."

Nickel concluded his statement with a nod to Rep. Emmer's notion that the Democratic presidential nominee's comments, when read between the lines, were a "rebuke of your [Gensler] leadership at the SEC."

SEC Has Done 'Good Work': Waters

Despite most of the committee members, both Democrats and Republicans, having taken a critical view of Gensler's leadership, Rep. Maxine Waters, D-Calif., said Gensler has done "good work."

She said that since Gensler took the lead seat in the regulatory agency, the SEC has provided fair marketplaces and held bad actors accountable. She also pushed for a stablecoin-centric legislation.

Throughout the hearing, Gensler refused to provide clarity on questions lawmakers asked that should have helped clarify the SEC's position on the status of crypto as securities or commodities.

"The laws are clear but what we're seeing from the SEC is a lack of clarity ... the direct question is about the different terms, and rather than answering that question, you answer a separate question. Kudos to you," a visibly annoyed McHenry said to Gensler at one point as the policymaker tried to press the SEC chair for clarity on whether the regulator differentiate "between crypto tokens and tokenized securities."

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