SEC's Gensler Says House Bill Would 'Undermine' Regulator's Crypto, Capital Markets Oversight
Will the FIT21 Bill Weaken SEC's Crypto Control?
SEC Chair Gary Gensler criticized the FIT21 bill, claiming it would weaken SEC oversight on cryptocurrencies and capital markets. He argued that the bill introduces regulatory gaps, undermines established investment contract oversight, and jeopardizes investor protections by redefining certain crypto assets as "digital commodities" under CFTC control. Gensler highlighted the bill's potential risks to the broader U.S. capital markets and the insufficient time allocated for the SEC to evaluate digital commodities.
What are the potential risks to investors and capital markets that Gensler highlights as consequences of the FIT21 bill?
SEC Chair Gary Gensler has expressed concerns that the FIT21 bill could create new regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts, putting investors and capital markets at risk. Gensler believes that FIT21 ignores long-standing precedent for how investment contracts are regulated, places the SEC in a difficult position for certifying self-proclaimed digital commodity issuers, disregards Supreme Court precedent in the Howey Test, removes investor protections, and potentially allows investors to take on excessive risk without appropriate disclosures. Furthermore, Gensler argues that the bill could harm the U.S.'s broader capital markets by allowing companies to avoid SEC oversight by using some sort of decentralized network.
What specific regulatory gaps does SEC Chair Gary Gensler claim the FIT21 bill would create in the oversight of investment contracts?
SEC Chair Gary Gensler argues that the FIT21 bill would create significant regulatory gaps by redefining certain investment contracts as "digital commodities," which would not be subject to the same stringent regulations as securities4. This reclassification would place these digital commodities under the oversight of the Commodity Futures Trading Commission (CFTC) rather than the Securities and Exchange Commission (SEC), effectively bypassing established securities laws4. Gensler highlights that this shift would undermine decades of legal precedent, particularly the criteria established by the Supreme Court's Howey Test for determining what constitutes a security. He contends that the bill's framework for self-certification of digital commodities by companies is inadequate, as it allows only a 60-day period for the SEC to determine whether these assets meet the new criteria, a timeframe he deems insufficient given the vast number of digital assets in circulation4. This, according to Gensler, could lead to reduced investor protections and increased risks, as the bill fails to adequately consider the economic realities of these assets4.