SEC Chair Gary Gensler’s Crypto Crackdown: The Flip-Flop Saga

The Call for Compliance

On April 27, 2023, SEC Chair Gary Gensler took to Twitter, laying down the law on the crypto industry with his definitive stance: many platforms are likely not playing by the rules. He shared a brief video where he articulated that crypto assets essentially function as “investment contracts”—not just shiny digital tokens floating around in the ether. His tirade aimed at platforms offering such products urged them to get their acts together and register with the SEC to safeguard American investors. Funny how we never hear about the “good ol’ days of crypto” anymore, right?

Defining Investment Contracts

Gensler isn’t just throwing jargon around. According to him, an investment contract exists when someone plunks down their cash into a common venture with a reasonable hope of profit depending on others’ efforts. So, if your crypto platform isn’t registering with the SEC, it’s in potential violation of securities laws. In his own words, “The law cares about what something actually is, not what you call it.” Oh, Gary, we get it—playing semantics is for high school debate teams, not the crypto market.

Gensler vs. The Crypto Firms

While Gensler insists on strict adherence to regulatory compliance, the crypto platforms seem determined to misclassify their offerings. Many claim their investment contracts are anything but. As Gensler so succinctly pointed out, the law is drawn very clearly in the sand: If you’re a securities exchange, broker, or dealer, you must comply and register. It’s like saying you can’t just call a cat a dog because it woofs every now and then!

The Controversial Flip-Flop

In a rather comic twist of fate, critics were quick to recall Gensler’s previous statements where he defined much of the crypto space as “non-securities.” Back in his teaching days at MIT, he found it pertinent to say, “Three-quarters of the market is non-securities, it’s just a commodity, cash, crypto.” Funny how that didn’t age like a fine wine! Now, the same man seems to have changed his tune, suggesting a massive paradigm shift in understanding. So much for the good old days of professor wisdom!

Congress Grills Gensler

The heat didn’t stop with social media; Congress took Gensler for a spin during an April 18 hearing that left many legislators scratching their heads over his approach to crypto regulation. Gensler’s evasiveness about whether Ether (ETH) is a security or not only added fuel to the fire. At this point, folks, the SEC’s approach could easily be mistaken for regulation by enforcement—an ambiguous game we all seem to be trapped in. Maybe it should come with a warning label: Handle with care!