Commissioner: SEC’s crypto dismissals undermine our credibility

The US Securities and Exchange Commission’s (SEC) has come under fire by one of its own commissioners for its dismissal of enforcement action against Coinbase and other crypto trading platforms.

In dissenting remarks published alongside the SEC’s announcement it would drop the Coinbase suit, commissioner Caroline Crenshaw said the move “undermines the credibility of our division of enforcement” and “ignores 80 years of well-established law”.

Since the SEC announcement last week, Kraken and Consensys announced cases against them have been dropped while crypto businesses Robinhood, Uniswap, Yuga Labs, Gemini, and OpenSea — which had received Wells notices informing them of SEC investigations — said these have been dropped. Meanwhile, the regulator has also paused its lawsuit against Binance.

The SEC said its decision rested on “its judgment that the dismissal will facilitate the commission’s ongoing efforts to reform and renew its regulatory approach to the crypto industry”.

Crenshaw commented: “We say we are dismissing the action because of future recommendations that may be made by the ‘crypto task force dedicated to helping the commission develop the regulatory framework for crypto assets’. But whatever the law may be tomorrow, market participants should not be able to avoid the law as it stands today.”

There was no way of knowing what, if any, regulations or rules the SEC’s crypto taskforce might recommend, she said. Furthermore, the SEC had established a track record of successful enforcement actions against firms like Coinbase, Crenshaw added.

Politically driven regulator

Crenshaw warned against the risk of dropping cases in conjunction with politicians’ wishes. “It creates the spectre that the agency will deploy its enforcement resources in conjunction with election cycles or in favour of those with means. This invites criticism that our agency is politicised and sows distrust in government,” she said.

“Our agency’s job is to do what is right for investors, issuers and capital markets. This is not it.”

She also pushed back against the idea that the SEC’s previous stance had been ‘regulation by enforcementʼ, saying: “The newly created crypto task force may intend to make recommendations to answer some of these questions, but we do not have any legally enforceable answers yet.

“In fact, the most salient change to date has been this retreat from enforcement of the securities laws with respect to crypto. Or, ‘regulation by non-enforcement’.”