Chair Gary Gensler’s Shot Across the Bow of Crypto Tokens

The chair of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, issued his starkest warning yet to those in the crypto industry issuing tokens, at the SEC Speaks event. Gensler stated his belief that of crypto tokens currently available, the “vast majority are securities.” He responded to complaints that the SEC had not put out clear guidelines on crypto tokens, saying that the “Commission has spoken with a pretty clear voice,” noting the SEC’s investigative report on DAO tokens and its various enforcement actions. Gensler also pushed back by saying, “Not liking the message isn’t the same thing as not receiving it.” He explained that crypto tokens “are not laundromat tokens: Promoters are marketing and the investing public is buying most of these tokens, touting or anticipating profits based on the efforts of others.” However, he conceded that “[g]iven the nature of crypto investments, I recognize that it may be appropriate to be flexible in applying existing disclosure requirements.” He encouraged those offering crypto tokens to register with the SEC the tokens as securities. The theme of his speech was a quote by Joseph Kennedy, the first chairman of the SEC, who said, “No honest business need fear the SEC.” Finally, he indicated that for the minority of crypto tokens that were not securities, the Commodity Futures Trading Commission (CFTC) needed to be given greater authority from Congress to regulate those tokens.

Gensler said that his statements are his opinions, not those of the SEC. However, it is unlikely to be a coincidence that his statements come on the heels of the SEC doubling the size of the Crypto Assets and Cyber Enforcement unit and ramping up enforcement actions. His statements also come with the SEC adding a new office specifically for streamlining the process for disclosures by crypto assets. From his remarks, it also seems that the SEC will not be issuing additional special guidance for the registration of crypto tokens and that Gensler believes that the current level of direction is sufficient. His comments can also be understood to be a warning that further enforcement actions are coming from the SEC, potentially against well-known and well-established tokens. 

Gensler’s remarks respond to those in the crypto industry seeking regulatory clarity from the SEC. They also come after at least one commissioner of the SEC, Hester Peirce, requested that the SEC and CFTC hold joint roundtables that include members of the crypto industry. No roundtables have yet been scheduled.