\n<\/p>\n
Gary Gensler appears resigned to having to resign as America\u2019s securities regulator, while Tether\u2019s (alleged) treasury custodian seems to have overplayed his hand to become the new Treasury secretary.<\/p>\n
On November 14, Securities and Exchange Commission (SEC) Chair Gensler gave a speech to New York\u2019s Practising Law Institute (PLI) in which he appeared to hint that his time as the SEC\u2019s top dog was coming to a close. While avoiding the \u2018R\u2019 word, he spoke primarily in the past tense regarding his tenure at the SEC.<\/p>\n
President-elect Donald Trump has publicly vowed to fire Gensler \u201con day one\u201d of his second term in office, and while legal scholars might debate a president\u2019s ability to sack an SEC chair prior to the expiration of his\/her term, few doubt that Trump won\u2019t give it a shot.<\/p>\n
Gensler previously stated that he\u2019d resist any effort to push him out the door before his term expires in 2026, but he now appears resigned to the inevitable. That said, Gensler couldn\u2019t resist getting in a few final shots at the \u2018crypto\u2019 sector, against which Gensler has directed numerous SEC enforcement actions.<\/p>\n
Gensler noted that crypto\u2019s spread has resulted in \u201csignificant investor harm. Further, aside from speculative investing and possible use for illicit activities, the vast majority of crypto assets have yet to prove out sustainable use cases.\u201d<\/p>\n
Leaving aside BTC and ETH, Gensler said the SEC\u2019s crypto focus has been on \u201csome of the 10,000 or so other digital assets, many of which courts have ruled were offered or sold as securities.\u201d He added that \u201ccourt after court has agreed with our actions to protect investors and rejected all arguments that the SEC cannot enforce the law when securities are being offered\u2014whatever their form.\u201d<\/p>\n
Everyone, including many state-level officials, doesn\u2019t share Gensler\u2019s views. While Gensler was giving his speech, 18 state Attorneys General (all Republicans) filed a civil complaint in federal court accusing Gensler, his fellow SEC commissioners, and the SEC itself of defying the \u201cbasic principles of federalism and separation of powers\u201d regarding the SEC\u2019s digital asset regulatory enforcement strategy.<\/p>\n
The complaint accuses Gensler et al. of seeking to \u201cunilaterally wrest regulatory authority away from the States through an ongoing series of enforcement actions targeting the digital asset industry, premised on the theory that practically all purchases and sales of digital assets are \u2018investment contracts\u2019\u2014and so qualify as securities transactions under the Securities Act of 1933 and the Exchange Act of 1934.\u201d<\/p>\n
The suit accuses the SEC of having \u201cscrupulously avoided promulgating its position in a written rule through notice-and-comment rulemaking,\u201d while the oft-cited \u2018regulation by enforcement\u2019 strategy \u201chas the advantage of limitless enforcement discretion.\u201d The suit seeks to bar the SEC from continuing its \u201cunlawful campaign of regulatory overreach and interference with state sovereignty.\u201d<\/p>\n
There are multiple SEC v crypto suits currently before the courts, including one accusing Ethereum-based blockchain software firm\u00a0Consensys of failing to register as a securities broker and offering unregistered securities to the public.<\/p>\n
In a post-election interview, Consensys founder Joe Lubin said he expects the newly Trumpified SEC to \u201cget the cases dismissed or settled, or something like that.\u201d Not all cases might be resolved swiftly, but Lubin has \u201ca feeling that our industry is going to save hundreds of millions of dollars going forward.\u201d<\/p>\n
Jay Clayton starts spreading the news<\/strong><\/p>\n There will definitely be fewer crypto prosecutions filed in the nation\u2019s financial heartland following word that Trump had nominated Jay Clayton as the new U.S. Attorney for the Southern District of New York (SDNY).<\/p>\n A former partner at the crypto-friendly law firm Sullivan & Cromwell, Clayton was Gensler\u2019s predecessor as SEC chair. Clayton\u2019s tenure included the SEC\u2019s controversial take that Ethereum\u2019s ETH token was once a security but became \u2018decentralized over time\u2019 to the point that it was no longer a security.<\/p>\n During his nearly four-year SEC stint, Clayton was sharply critical of tokens issued via initial coin offerings (ICO), telling Congress that \u201cevery ICO I\u2019ve seen is a security.\u201d (For the record, ETH was issued via an ICO.) In one of Clayton\u2019s final acts as SEC chair before resigning in December 2020, Clayton okayed the SEC\u2019s controversial lawsuit against Ripple Labs, whose XRP token apparently never made that \u2018decentralized\u2019 journey.<\/p>\n Just one day before Trump\u2019s announcement, Clayton was quoted predicting \u201cwe will see crypto legislation\u201d in Trump\u2019s second term. \u201cI think it becomes much easier to have crypto legislation if you\u2019re tackling some of these problems that can be addressed at the executive and administrative level.\u201d<\/p>\n SDNY sees the writing on the wall<\/strong><\/p>\n The day after Trump nominated Clayton, Reuters reported that the SDNY\u2019s office plans to scale back its crypto investigations to prioritize actions closer to Trump\u2019s heart, including enforcing immigration laws.<\/p>\n Scott Hartman, co-chief of the SDNY\u2019s securities and commodities division, told the PLI audience that SDNY had \u201cbrought a lot of big (crypto) cases \u2026 a lot of important fraud cases \u2026 but we know our regulatory partners are very active in this space, and we don\u2019t have a lot of people.\u201d<\/p>\n The problem is that those federal partners are signaling similar enforcement slowdowns. Commodity Futures Trading Commission (CFTC) enforcement director Ian McGinley reminded the PLI that, almost exactly one year ago, the CFTC\u2019s annual enforcement report for fiscal 2023 showed nearly half of all cases involved \u201cconduct related to digital asset commodities.\u201d McGinley said he wasn\u2019t sure \u201cif that trend will necessarily continue,\u201d promising only to stay alert for \u201cfraud and manipulation in those markets.\u201d<\/p>\n While the SDNY will undoubtedly follow through on its prosecutions of notorious crypto crooks like Alexander Mashinsky, it\u2019s unclear what the new approach might mean for existing probes that haven\u2019t yet resulted in charges, including one involving Jack Dorsey\u2019s BTC-friendly payment processor Block (NASDAQ: SQ).<\/p>\n CFTC musical chairs<\/strong><\/p>\n Given that most of the pro-crypto legislation currently making the rounds in Congress explicitly shifts regulatory oversight from the SEC to the CFTC, Trump\u2019s pick to head up that agency may prove more important in the long run.<\/p>\n Reuters\u2019 short list of candidates includes current CFTC Commissioner Caroline Pham, who has a history of crypto advocacy and is reportedly keen to replace current Chair Rostin Behnam. Another current CFTC commissioner in this hunt is Summer Mersinger, also a crypto advocate as well as a former aide to Sen. John Thune (R-SD), the newly elected Senate majority leader.<\/p>\n Former commissioner Jill Sommers and Josh Sterling, the CFTC\u2019s former market participants division director, are also said to be in the running.<\/p>\n Lutnick getting on Trump\u2019s nerves?<\/strong><\/p>\n Meanwhile, one of the names being bandied about as Gensler\u2019s potential replacement at the SEC now says he doesn\u2019t want the job.<\/p>\n While Gensler was giving his PLI speech, former CFTC Chair Chris Giancarlo tweeted that he\u2019d \u201calready cleaned up earlier Gary Gensler mess @CFTC and don\u2019t want to have to do it again.\u201d Giancarlo also denied rumors that he was \u201cinterested in some #crypto role @USTreasury.\u201d<\/p>\n Speaking of, the \u2018knife fight\u2019 to become Trump\u2019s new Treasury chief made headlines over the weekend. The New York Times reported that Howard Lutnick, CEO of Wall Street financial services firm Cantor Fitzgerald\u00a0(NASDAQ: ZCFITX) and co-chair of Trump\u2019s transition team, \u201chas gotten on Mr. Trump\u2019s nerves lately.\u201d Trump is said to be frustrated by Lutnick, who is \u201changing around him too much\u201d and \u201cmanipulating the transition process for his own ends.\u201d<\/p>\n Reports surfaced last week that Lutnick was \u201ccampaigning hard\u201d to be considered for the Treasury role and rubbishing rival candidates like Scott Bessent, founder\/CEO of the Key Square Group hedge fund. Lutnick\u2019s campaign got a boost from Trump-whisperer Elon Musk, who tweeted on November 16 that \u201cBessent is a business-as-usual choice, whereas @howardlutnick will actually enact change.\u201d<\/p>\n Robert F. Kennedy Jr., who last week was named Trump\u2019s choice to head up Health & Human Services (HHS), tweeted his own support for Lutnick on November 13, claiming that the BTC token \u201cwill have no stronger advocate than Howard Lutnik (sic).\u201d<\/p>\n But other insiders claim Lutnick has a growing reputation inside Trump\u2019s Mar-a-Lago resort as \u201ctoo competitive, too aggressive, and too thirsty.\u201d While Lutnick could still pull off the nomination, it will reportedly hinge on whether he can \u201clearn to keep his head down and shut the f*ck up.\u201d<\/p>\n Lutnick\u2019s other negatives include claiming to act as custodian for the roughly $100 billion in Treasury bills allegedly owned by Tether, the scandal-plagued issuer of the USDT stablecoin. The past few weeks have brought credible reports that both Treasury and the Department of Justice (DoJ) are preparing charges against Tether for a variety of crimes, including facilitating money transfers by sanctions evaders, Mexican drug cartels, and terrorist groups.<\/p>\n Lutnick\u2019s influence with Trump appeared to take a hit last week after Trump dropped his RFK\/HHS bombshell. That news came two weeks after Lutnick insisted to CNN that Trump wouldn\u2019t<\/em> nominate RFK for the role.<\/p>\n Also not helping Lutnick\u2019s case are suspicions that he leaked word that Trump would nominate Sen. Marco Rubio (R-FL) for Secretary of State, a breach that reportedly left Trump fuming (and Musk trying to redirect blame by accusing Trump advisor Boris Epshteyn of leaking). Suspicions of Lutnick being the leaker reportedly meant he was not in the loop regarding Trump\u2019s subsequent pick of Matt Gaetz for U.S. Attorney General.<\/p>\n Lutnick was said to be in line for a consolation prize of heading up the Commerce department or serving as director of the National Economic Council, but it\u2019s not clear whether he\u2019d accept the public demotion. Other reports have Linda McMahon\u2014the other transition team co-chair\u2014getting the Commerce nod, seemingly leaving Lutnick with scraps or nothing.<\/p>\n So, if not Lutnick\u2026?<\/strong><\/p>\n On November 18, Reuters reported that Trump was widening his search for Treasury candidates, with former Federal Reserve Governor Kevin Warsh and Apollo Global Management CEO Marc Rowan added to the shortlist. Each man will reportedly meet separately with Trump this week.\u00a0<\/p>\n Warsh has one major strike against him, namely, his prior support for central bank digital currencies (CBDC), something Trump despises but which Warsh believes is necessary to keep pace with China. Rowan, meanwhile, has offered tepid support for stablecoins but primarily as \u201can alternative currency\u201d for developing countries.<\/p>\n Politico reported that other potential Treasury noms include Trump\u2019s trade policy adviser Robert Lighthizer and Sen. Bill Hagerty (R-TN). The latter is a known BTC booster who recently introduced a \u2018discussion draft\u2019 of yet another bill to regulate stablecoin issuers.<\/p>\n Trump\u2019s Treasury preference is said to be for someone who will back him 100% on his plan to impose stiff tariffs on imported goods, an area in which Lighthizer would seem to have a distinct edge over the rest.<\/p>\n I\u2019m your private chancer<\/strong><\/p>\n On November 18, the Wall Street Journal reported that Brian Armstrong, CEO of the Coinbase (NASDAQ: COIN)\u00a0exchange, would meet privately with Trump at some unspecified date to discuss crypto regulation and \u2018personnel appointments.\u2019<\/p>\n It\u2019s unclear whether \u2018personnel\u2019 refers to cabinet-level staff or to members of the \u201c(BTC) and crypto presidential advisory council\u201d that Trump referenced in his speech to attendees of the annual BTC confab in Nashville this summer.<\/p>\n Regardless, Armstrong is on record with his belief that current SEC commissioner Hester\u2019 Crypto Mom\u2019 Peirce would be \u201cthe best choice\u201d to replace Gensler, so any discussion with Trump will likely include that recommendation.<\/p>\n Coinbase was among the biggest campaign finance contributors in the 2024 election cycle. While the company and its various political action committees didn\u2019t aid Trump directly, they claim to have helped elect many \u2018crypto-friendly\u2019 Republican candidates. And with Armstrong\/Coinbase recently pledging to spend another $25 million (minimum) in the 2026 midterms, Trump may be keen to keep the crypto-cash on his side.<\/p>\n The New York Times reported last week that Coinbase was working with Trump\u2019s transition team to connect Armstrong with Lutnick, but the scope of that meeting is unclear. Given Lutnick\u2019s Tether ties and Coinbase\u2019s partnership with Tether rival Circle on the USDC stablecoin\u2014and Circle\u2019s public suggestion that federal lawmakers could target Tether by targeting their T-bill custodian Cantor Fitzgerald\u2014that could be one awkward hangout.<\/p>\n Armstrong isn\u2019t the only crypto CEO reportedly getting some Trump facetime. Over the weekend, Fox Business reported that Ripple CEO Brad Garlinghouse met with Trump last week, a claim that Garlinghouse neither confirmed nor denied. The news upset some in the BTC maximalist community, who believe this moment is theirs and theirs alone.<\/p>\n Here\u2019s hoping that in between all these conversations between billionaires, the new administration doesn\u2019t forget the millions of ordinary citizens who voted them into power.<\/p>\n Watch: Teranode is the digital backbone of Bitcoin<\/p>\n