Securities and Exchange Commission Chair Gary Gensler got what he wanted on Monday. The media lapped up news of his agency slapping Kim Kardashian with a $1.26 million fine for promoting a cryptocurrency on Instagram. It was the top story of the day in the business and tech press, and that’s no surprise since Gensler planned it that way—taking the unusual step of announcing it on a Monday before markets opened and hyping the heck out of it with a video designed to ride the coattails of Kardashian’s celebrity status.
What a shame this is all so stupid. As some astute Twitter users pointed out, the promotion in question was from June of 2021, and the SEC’s fine matters little in the bigger picture of crypto regulation. Meanwhile, Gensler’s agency failed to spot the massive frauds underlying Terra and Celsius earlier this year that helped wipe out more than $1 trillion, much of it from small investors. His SEC has also refused to approve a Bitcoin ETF similar to those in place in Canada and Europe, a step that would save retail investors millions in fees.
And in what amounts to a dereliction of basic duties, Gensler’s SEC has refused to provide clarity on the critical issue of what constitutes a security in crypto markets. Instead, he has chosen a “regulation by enforcement” approach, leaving companies to guess the SEC’s rules instead of crafting a legal process to define them. This sleight of hand has included using legal settlements to declare that certain tokens are securities—a tactic that leaves defendants no chance to rebut, and lets the SEC make decisions without explaining them.
The reasons for Gensler’s behavior are no secret. Ask anyone in Washington, DC, and they’ll tell you he is gunning to be treasury secretary after Janet Yellen leaves the post. This includes a senior lawyer who worked closely with Gensler at the SEC and told me this summer he is doubling down on theatrical enforcement actions in hopes of pleasing Sen. Elizabeth Warren, who has President Joe Biden’s ear on financial policy. (The source added that Warren is not fond of him, and Gensler has no hope of realizing his dream.)
Gensler is hardly the first agency head to have outsized ambitions, and there is nothing wrong with the SEC cracking down on celebrity crypto shills like Kardashian. The issue is that his decision to prioritize media antics and his own ego is actively hurting investors and the country. Blockchain and crypto are here to stay, and if the industry is to flourish in the US just as the Internet did, there must be clear rules and a regulatory framework to make that happen. Monday’s stunt makes it clear that Gensler has no interest in doing hard political work, and that the SEC has become a vehicle for his personal ambition. We deserve better.
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