U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler faced tough questions from both Republicans and Democrats during a House Financial Services Committee hearing on Tuesday, with lawmakers scrutinizing his approach to regulating the cryptocurrency industry.
Republican Majority Whip Tom Emmer sharply questioned Gensler over the SEC’s handling of a case involving crypto startup DEBT Box. A federal judge in Utah had criticized the SEC’s actions in the case, accusing the agency of acting in bad faith. The court ordered the SEC to pay sanctions, including attorney’s fees. The judge also cited misleading statements from the SEC, which later admitted its shortcomings.
“Does the fact that we’re talking about this today even slightly embarrass you?” Emmer asked.
Gensler acknowledged, “The matters in that case were not well handled.”
Lawmakers have long debated the SEC’s approach to regulating crypto, with some arguing that the rules remain unclear. On the other hand, Democrats like Maxine Waters defended the SEC’s role, asserting that it is protecting investors and maintaining the integrity of the U.S. capital markets.
The hearing took place as the 2024 elections approach, where cryptocurrency has become a central issue. Crypto firms have reportedly spent $119 million in 2024, largely funneled into super political action committees like the Fairshake PAC, according to consumer advocacy group Public Citizen.
Emmer, a frequent critic of Gensler, also raised comments by Vice President Kamala Harris, who recently said he supports innovative technologies like digital assets, while emphasizing consumer protection. Emmer asked Gensler if he aligned with Harris’ position or if she was criticizing the SEC’s regulatory efforts.
Gensler responded by stating that laws are already in place, though Congress has the power to change them.
lawmakers challenge SEC stance on securities
During the hearing, Democrat Ritchie Torres questioned Gensler’s definition of securities, using a New York Yankees ticket as an example. He asked if selling such a ticket would constitute a security, highlighting the ticket’s value in providing access to a game.
This analogy follows the SEC’s recent charges against entities like Stoner Cats 2 LLC for unregistered securities offerings, including NFTs.
Gensler pointed to the Howey Test, a legal standard used to determine whether something qualifies as a security, saying it depends on whether there’s an expectation of profits tied to a common enterprise.
Torres argued that the expectation of profit could apply to various assets, including collectibles, art, or music, further questioning the SEC’s broad interpretation of securities laws.
