Gary Gensler: cryptocurrencies are securities, the law leaves no room for alternative readings

Under the law, cryptocurrencies are investment contracts; platforms that offer them must register with the SEC. This was stated by the head of the agency, Gary Gensler.

Intermediaries for investment contracts are required to comply with securities laws & register with @SECGov.

Instead, many crypto platforms are contending that their investment contracts are something else.

The law cares about what something actually is, not what you call it.

— Gary Gensler (April 27, 2023)

“Intermediaries … are required to comply with securities laws and register with the Commission. … Many platforms argue that the investment contracts they added are something else. Regulations determine what it actually is, not what you call them,” said Gensler.

“The law is clear,” the head of the SEC reiterated, citing the Howey test used for these purposes.

“An investment contract exists when you invest money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others. Crypto markets suffer from regulatory noncompliance. It is not a matter of regulatory clarity. … The law is clear: if you are a securities exchange, clearinghouse, broker, or dealer, you must follow it — register with us,” said Gensler.

In the comments under the video, many accused him of inconsistency. They recalled that before being confirmed as chair of the Commission he had held a different position.

User RyanSAdams shared a 2018 video from a lecture at MIT in which Gensler asserted that the SEC had already determined that three-quarters of digital assets are not investment contracts.

weird cause a guy told me three quarters of this space has already been determined by the securities and exchange commission not to be a security pic.twitter.com/0YsRcae3St

— RYAN SΞAN ALTCOIN — rsa.eth ??? (@RyanSAdams) April 27, 2023

Earlier in the community there was active discussion about another clip from that period in which the regulator’s head described cryptocurrency as being in the same category as cash and commodities, calling digital assets “not securities.”

In the video, the word «wow»reacted and the head under the regulator’s scrutiny of the Coinbase exchange Brian Armstrong.

The platform’s chief legal officer, Paul Grewal, effectively accused Gensler of hypocrisy.

“There needs to be clarity. We would like to be able to register, but it isn’t simply a matter of going to a website and uploading a form, as proposed. Since that isn’t possible, it would be hypocritical to imply the opposite,” said he.

The community had already drawn attention to the mismatch with his previous statements.

In the proceedings against the Bittrex exchange, the regulator equated the native token of the Algorand blockchain (ALGO) with a security. Yet in reading the MIT course mentioned, Gensler said that the founder of the crypto project Silvio Micali “created an excellent technology with incredible performance, on which you could even deploy Uber.”

Earlier, the Republican House majority leader Tom Emmer criticised the SEC chair’s approach to crypto regulation.

Congressman Warren Davidson unveiled a bill proposing the removal of Gensler from his post.