Securities and Exchange Commission Chairman Gary Gensler got what he wanted Monday. The media reported that Kim Kardashian was slapped with a $1.26 million fine by her agency for promoting a cryptocurrency on Instagram. It was the top story of the day in the business and technology press, and that’s no surprise since Gensler planned it that way, taking the unusual step of announcing it on a Monday before the open markets and promote it with a designed video. to ride the skirts of Kardashian’s celebrity status.
What a shame this is all so stupid. Like some crafty Twitter users pointed out, the promotion in question was from June 2021, and the SEC fine matters little in the big picture of crypto regulation. Meanwhile, Gensler’s agency failed to detect the massive fraud underlying Terra and Celsius earlier this year that helped wipe out more than a trillion dollars, much of it from small investors. Its SEC has also refused to approve a Bitcoin ETF similar to those in Canada and Europe, a step that would save retail investors millions in fees.
And in what amounts to a dereliction of basic duties, Gensler’s SEC has refused to provide clarity on the critical question of what constitutes a security in the crypto markets. Instead, it has chosen a “regulation-by-enforcement” approach, leaving companies to guess at the SEC’s rules rather than crafting a legal process to define them. This sleight of hand has included using legal agreements to declare certain tokens as securities, a tactic that leaves defendants with no chance to rebut and allows the SEC to make decisions without explaining them.
The reasons for Gensler’s behavior are no secret. Ask anyone in Washington, DC, and they’ll tell you they’re considering being Treasury Secretary after Janet Yellen leaves office. That includes a senior lawyer who worked closely with Gensler at the SEC and told me he is doubling down on theatric enforcement actions this summer in hopes of pleasing Sen. Elizabeth Warren, who has the ear of President Joe Biden in financial policy. (The source added that Warren doesn’t like her and Gensler has no hope of making her dream come true.)
Gensler isn’t the first agency chief to have outsized ambitions, and there’s nothing wrong with the SEC cracking down on celebrity crypto like Kardashian. The problem is that his decision to prioritize media shenanigans and his own ego is actively hurting investors and the country. Blockchain and crypto are here to stay, and if the industry is to thrive in the US the way the Internet did, there must be clear rules and a regulatory framework to make it happen. Monday’s stunt makes it clear that Gensler has no interest in doing hard political work and that the SEC has become a vehicle for his personal ambition. We deserve better.
Jeff John Roberts
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