When Gary Gensler took office as chairman of the US Securities and Exchange Commission (SEC) in 2021, he made no secret of his intention to wage war against “decentralized theater.” While some predicted the former banker who taught a blockchain course at the Massachusetts Institute of Technology (MIT) would have an easier time accessing the industry than his predecessor, Gensler quickly Treat cryptocurrency like a game of charades.

Gary Gensler – Chairman of the US Securities and Exchange Commission

Throughout Gensler's tenure, the SEC has filed countless lawsuits against cryptocurrency industry participants, including some of the largest such as Coinbase, Binance, and Terraform Labs. While the SEC has won a number of cryptocurrency-related lawsuits (mostly in settlements), Gensler's profound theory that nearly every token except Bitcoin is in his sights is gradually emerging. exposed points. The evidence is that the agency's losses in court and failed investigations are increasingly piling up.

For example, just last Thursday, the US securities regulator dropped its investigation into the Binance exchange-branded stablecoin BUSD issued by Paxos.

“The idea that stablecoins themselves are securities is absurd. And Judge Jackson confirmed that BUSD is not a security in the lawsuit filed by the SEC and the exchange Binance. Therefore, it is reasonable for the SEC to drop the lawsuit with Paxos, leading to a visible loss for them," shared lawyer James Murphy of MetaManLaw.

Here's a quick summary of some of the most notable losses by securities regulators in the United States.

Bitcoin ETF

To be fair, the SEC has been steadfastly opposed to approving spot Bitcoin exchange-traded funds (ETFs) since twin brothers Tyler and Cameron Winklevoss made the first attempt to launch such a fund. in 2013. But a decade later, in January 2024, the agency was overturned by an appeals court in Washington D.C. forced approval of Bitcoin ETFs due to their “arbitrary and capricious” attempt to hinder the conversion of Grayscale Bitcoin Trust into an ETF.

As of July 9, spot Bitcoin ETFs have accumulated net inflows of $15.27 billion since going live. And the agency is in the process of approving an ETF for Ethereum's native token ETH.

Ripple, XRP and Securities Law

In fact, the SEC's legal battle against Ripple Labs technically took place before Gensler took office (the case was filed toward the end of former SEC head Jay Clayton's tenure as chairman). However, most of the work and, more importantly, the judgment was done under Gensler's leadership.

District Judge Analisa Torres ruled that while Ripple's sale of XRP to firms such as hedge funds and exchanges constitutes an unregistered securities sale, a secondary sale (also known as a “programmatic sale”) ) is not. In other words, contrary to Gensler's view that “most tokens are securities,” Judge Torres ruled that digital assets themselves do not necessarily violate federal securities laws.

“Surely the SEC is losing the battle to create “cryptocurrency securities” by surprise, as the courts strike them down and they are forced to end their investigations. I think they will still fight, but they are losing ground,” said associate professor Austin Campbell of Columbia Business School.

SAB 121

The relatively complex accounting rule SAB121* briefly became the focus of attention in Congress earlier this year after both the U.S. House and Senate voted to repeal the SEC's SAB. Although lawmakers have not yet reached the threshold of blocking US President Joe Biden's veto of the measure, the political fight is seen as something of a dark one for the SEC.

Last year, the Government Accountability Office (GOA) said the SEC had imposed inappropriate guidance that should have been presented to the US Congress first. The regulation is also widely opposed by those interested in the banking industry because it imposes strict capital requirements on any financial company that wants to custody cryptocurrencies.

D.E.B.T. Box

SEC lawsuit against cryptocurrency startup D.E.B.T. Box would likely be a routine, largely unnoticed legal matter if the agency hadn't committed perjury. In a March filing, Utah District Court Judge Robert Shelby chastised the agency, saying the case was “marred by false statements and misrepresentations” after the securities regulator tried to improperly attempting to freeze the company's assets.

In May, Judge Shelby ordered the SEC to pay about $1.8 million to cover D.E.B.T.'s legal fees. Box. The two SEC agents who pursued the case resigned, the SEC moved to dismiss the case, and the agency's Salt Lake Regional Office in Utah was closed.

Recent SEC victories and potential future risks

With all that said, the SEC has scored a number of recent victories that could finally set policy in its favor. It's worth mentioning that many of the SEC's successful enforcement actions go unnoticed, often by suing small companies or netting the agency small profits. This represents only a small amount of the $4.5 billion settlement that Terraform Labs and Do Kwon agreed to pay.

For example, since the beginning of this year, the SEC has successfully resolved three cryptocurrency-related cases, including Rockwell Capital Management, decentralized exchange ShapeShift, and the allegedly fraudulent brokerage firm TradeStation. In March, the agency also charged 17 individuals for their roles in a $300 million Ponzi scheme after being suspended in 2022.

Furthermore, while the SEC has had its fair share of stinging defeats in court, it has scored some recent victories that may finally tip policy in its favor. For example, exchange Coinbase attempted to refute all three of the SEC's allegations but largely failed. Judge Faila dismissed the charges against Coinbase Wallet but allowed the SEC to sue over the staking program. She also “agreed that the initial offering may involve an offering of securities,” Campbell said.

A similar situation occurred in the SEC's lawsuit against Binance, which also failed to convince the court to dismiss the case.

Molly White, author of the crypto-critical blogs Web3IsGoingGreat and Citation Needed commented on the dropped BUSD investigation:

“The SEC still appears to be aggressively pursuing many cases involving digital currencies, and in my opinion not every investigation has resulted in enforcement action.”

Bitfinex’d critic had a similar view, saying that expecting the SEC to win every case is like expecting “traffic police to stop gang wars.”

“The problem with “winning” against the SEC is that there is still a high price to pay. Plus, it distracts companies from more valuable efforts. In that way, the process becomes a punishment,” said co-head of payments at Javelin Strategy and Research.

In short, the SEC has become more aggressive in its fight against the crypto industry over the years, choosing to go after the largest and most iconic companies like Coinbase, Uniswap, and Consensys. The agency relentlessly pursues actions that send the message that no corner of crypto is safe.

While cryptocurrencies may occasionally win, they are generally losing in practice – at least for now. All of that could change if a new administration takes over the White House in 2025.

*SAB 121 is a U.S. SEC notice providing guidance on how public companies should treat and report accounting for digital assets, such as cryptocurrencies, on their financial statements. Released in March 2022, SAB 121 requires financial institutions and companies that protect customers' digital assets to consolidate assets on their balance sheets and disclose certain information. certain belief.

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