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The U.S. Securities and Exchange Commission (SEC) hosted a meeting where legal professionals expressed concerns that the regulator has overstepped its authority regarding cryptocurrency markets. Among the speakers were Jason Gottleib from Morrison Cohen, Andrew Hinkes from New York University, and J.W. Verrett from George Mason University.
Regulating Cryptocurrency Activities
The legal experts critically assessed decisions made during former SEC Chairman Gary Gensler’s tenure, arguing that a significant portion of cryptocurrency transactions should be excluded from regulatory oversight. They warned that current regulations are negatively impacting cryptocurrency developers and trading platforms.
J.W. Verrett stated, “Over the past four years, the SEC has distorted the law to target crypto developers and platforms. This must change, and the regulatory environment should allow for flexibility and collaboration in the future.”
Suggestions on the Howey Test
Participants emphasized the need to reassess how the SEC applies the 80-year-old Howey Test to the cryptocurrency sector. They noted that the test’s criteria—investment, joint venture, profit expectation, and reliance on the efforts of others—often fall short, especially in areas like staking and airdrops.
According to the Blockchain Association, “New interpretations may negatively impact the crypto industry by narrowing existing definitions and applications.”
The SEC’s Crypto Task Force, aiming to develop comprehensive regulations for crypto tokens, is reportedly taking steps based on the feedback shared by industry representatives. Under the leadership of Hester Peirce, the SEC is seeking written proposals from sector professionals.
Moreover, there have been moves to halt the Coinbase case, conclude the investigation into the NFT platform OpenSea, grant Binance a 60-day pause, and close the Uniswap investigation. These developments are viewed as indicators of a shift in regulatory approach.
Market participants are closely monitoring the situation, particularly with expectations that the nomination of the SEC chair may take time, and upcoming regulations could take months to clarify.
