Recent reports suggest that the current chairman of the US Securities and Exchange Commission (SEC) is expected to step down from his role in line with the regime change in the White House.
SEC Chairman Gary Gensler Expected to Step Down Ahead of Trump’s Inauguration
The former Goldman Sachs banker has been in charge of leading the strongest regulatory crackdown on the cryptocurrency sector, hitting industry players, including Coinbase and Binance, with enforcement lawsuits and hefty fines.
In a recent report, Markus Thielen, the CEO of 10x Research, wrote that Gensler is likely to voluntarily resign before Trump takes office. It is customary for the SEC chairman to step down as the new President is inaugurated, allowing for the appointment of someone who is aligned with the incoming administration’s policy direction.
This has been the historical norm, with Trump-appointed SEC chair Jay Clayton resigning before Joe Biden took office in January 2021, and Barack Obama-appointed Mary Jo White stepping down on the day of Trump’s first inauguration in 2017.
Thielen states that if this tradition continues, then Gensler could resign in December or January, and a new SEC chairman could be confirmed around April or May.
Gary Gensler, who took the helm of the SEC in 2021, has been known for implementing stringent regulatory measures targeting cryptocurrency exchanges, decentralized finance (DeFi) projects, and blockchain-based software developers. He even earned a reputation for being adversarial within the cryptocurrency industry.
The Commission has often touted its success in obtaining court judgments that align with its view that decades-old securities laws apply to the crypto asset class. The agency has been able to notch significant fines against some of the biggest names in the industry.
Back in April, the SEC claimed a massive $4.5 billion fine and disgorgement from Terraform Labs and its founder Do Kwon. While the financial watchdog is yet to release its annual enforcement report for 2024, it is expected to be more than 2023, when it brought 46 such cases, which was a 50% increase from the year prior.
J.W. Verret, a professor at George Mason University’s Antonin Scalia Law School in Arlington, Virginia, noted that while some of these cases involved legit fraud, a lot of them have been related to registration only, which were “foot fault” cases when registration was impossible.
Trump Promised to Fire Gary Gensler and Enact Pro-Crypto Policies
Despite Gensler’s term running until 2026, Trump has repeatedly expressed his discontent with the current boss of the SEC and pledged to fire him on the first day of office. Speaking at the Bitcoin 2024 conference in Nashville, the President-elect promised to dismiss Gensler and appoint someone who will introduce pro-crypto policies.
Meanwhile, Paul Grewal, the chief legal officer at Coinbase, urged the SEC to change its approach towards the crypto market following Trump’s victory. He expressed hope that the agency would adopt a regulatory framework that favors open dialogue and innovation over litigation. This reflects a growing sentiment among crypto advocates who are increasingly frustrated with the SEC’s enforcement actions.
Additionally, Republican Congressman French Hill criticized Gensler’s regulatory approach as “unconstitutional” and an abuse of the SEC’s authority. He demanded that the agency’s current leadership change next year.
Who Could Replace Gary Gensler as the SEC Chair?
Trump’s promise to remove Gensler has led to speculation about potential successors, especially candidates who may favor a more crypto-friendly approach.
Hester Peirce, an SEC commissioner who is known for her pro-crypto stance, is seen as a potential replacement for Gensler. She has been a vocal critic of the SEC’s enforcement-led approach, suggesting that regulatory clarity for the crypto industry would better serve the public interest and America’s position as a global leader in digital finance.
An unnamed crypto executive said they anticipate Gensler may still want to file cases against decentralized exchange Uniswap and NFT marketplace OpenSea, which have already received “Wells Notices” from the agency. Wells Notices is a process that formally notifies a company that they are under SEC investigation.
However, other enforcement cases could be slow-rolled as agency staff are aware that an incoming SEC Chair, one who is appointed by Trump, may look unkindly towards existing employees who have taken aggressive actions against crypto firms in the months leading up to a change in guard.
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