Regulation
How Gary Gensler’s SEC Beats Crypto Companies in Court – DL News
- The crypto industry has claimed a series of victories in litigation against the SEC.
- But a larger view shows that the regulator is indeed doing well in the early stages of cases.
A version of this story appeared in our newsletter The Guidance on June 24. here.
Kraken’s legal battle with US markets regulator will almost certainly continue, federal judge says suggests he will not dismiss the case.
It’s another example of how the Securities and Exchange Commission, chaired by Gary Gensler, is racking up victories in its case against the crypto industry.
That’s not what the industry says.
Crypto enthusiasts describe Gensler’s SEC as a serial loser in court.
It’s understandable.
The SEC has flooded crypto companies with enforcement measures.
Among other things, the regulator also pursues weight exchanges Binance And Coinbaseaccusing them of offering unregistered crypto securities on their platforms.
The issue is quite simply existential for the industry.
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Until Congress decides to write crypto-specific laws – and that may take a while – court cases will guide crypto regulation.
But so far, the SEC simply isn’t accepting the criticism some would have us believe.
Downside of cryptography
Take Kraken.
On Thursday, in court, Judge William Orrick ruled in favor of the SEC.
He said it was “plausible” that the crypto assets on Kraken were securities, adding that the exchange had its “work on its plate.”
Or take Coinbase.
In March, Judge Katherine Polk Failla sided with the SEC’s argument that 13 tokens listed in his lawsuit against the exchange were securities.
And then there is that of Judge Jed Rakoff. stating that Terraform Labs offered investors unregistered securities.
Failla, Orrick and Rakoff also paid little attention to the doctrine of major questions – a a kind of pet theory of crypto lawyers intended to challenge the authority of the SEC.
Imperfect file
This does not mean that the exchanges are over.
Judges rarely dismiss cases this early in a trial.
And their preliminary comments are not a guide to how they will ultimately rule.
Furthermore, the SEC’s record is not perfect:
- Grayscale’s Victory opened the way for Bitcoin spot exchange traded funds.
- Ripple Labs won in his case on the status of the XRP token, at least partially.
- THE Debt box fiasco was extremely embarrassing for the regulator.
But when it comes to those cases, only Ripple was a test of Gensler’s claims that most crypto assets are securities – and even that resulted in a shared decision by the judge.
Journalists Protos I did the calculations out of 116 closed crypto cases, showing the SEC won or settled 95% of them.
Time will test this winning streak.
The SEC’s lawsuits against the exchanges could end up in appeals courts, where the regulator’s arguments may not be as well received.
And the industry is now more proactive, with the Blockchain Association And Consensys file their own lawsuits against the SEC.
At this point, however, the SEC is not gaining the upper hand in court, as the industry would like to see.
Approach joanna@dlnews.com.