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June proved eventful as the U.S. Securities and Exchange Commission (SEC), under the leadership of Chairman Gary Gensler, brought lawsuits against the two biggest crypto exchanges, Coinbase and Binance. Gensler’s actions incited significant backlash from industry participants.
The actions of the SEC under Gensler’s stewardship drew criticism from the former Chairman Jay Clayton, who in a recent interview with CNBC recalled Gensler’s earlier statement, “If we’re not losing lawsuits, we’re not suing enough businesses.” Clayton believes this indicates a fundamental shift in Americans’ views of the government’s role, a shift he doesn’t endorse. “I don’t want to be in a place where the government is filing lawsuits they think they’ll lose,” Clayton stated.
His sentiments were echoed by the likes of Cameron Winklevoss, co-founder of the Gemini exchange, who labeled the situation as an “abuse of power” by Gensler. Further criticisms painted Gensler as behaving more like a politician than a regulator. However, it’s crucial to remember that it was Jay Clayton who filed a lawsuit against Ripple just before leaving office in late December 2020. So far, the SEC has struggled to substantiate its claim that Ripple sold XRP as unregistered securities during its 2013 ICO.
Following Clayton’s remarks, other industry players strengthened their defense. Attorney John Deaton, representing Ripple, pointed out that the judge in the Ripple case indicated SEC lawyers may not have complied faithfully with the law. In a legal case, lawyers are expected to hold an honest belief that they can win by correctly applying the law. The judge’s commentary implies that SEC lawyers may not have acted in good faith.
Amidst the turmoil, speculation is rife that Gensler might be biased towards BlackRock following the finance giant’s application for a spot Bitcoin ETF. It will be intriguing to see whether the SEC will grant any concessions to traditional finance’s big players.
Gensler is soon to appear before the U.S. House Committee to review the market structure of crypto assets. In the wake of Gensler’s actions this month, Congressman Warren Davidson from Ohio has petitioned for a reorganization of the agency and removal of Gensler from his post.
