Crypto expert says Gensler’s “opinion is not the law”

• Gary Gensler, the Chair of US US Securities and Exchange Commission (SEC) is increasingly aggressive on crypto.
• He recently told the New York Magazine that nearly every token had features that point to them being securities.
• Marcus Sotiriou says the SEC cannot prosecute all the companies and that Gensler’s opinion isn’t law.

Securities and Exchange Commission (SEC) Chair Gary Gensler recently opined that all tokens, except for Bitcoin (BTC), are securities.

The SEC chair’s comments are part of an aggressive stance he has taken against crypto tokens. However, Gensler’s opinion isn’t the law, Marcus Sotiriou, an analyst at publicly-listed digital asset broker GlobalBlock said in a market commetary.

SEC Chair said all crypto except BTC are unregistered securities

Gensler recently told the New York Magazine that for every other cryptocurrency that’s not bitcoin, there is a website, a foundation, entrepreneurs, or legal entities set up in a tax haven. 

According to him, the projects still qualify as securities offerings even if they try to make it difficult to jurisdictionally bring them under the existing securities laws.

The SEC boss has previously said it will not ban crypto, but it also over the past two years increased its enforcement actions across the space. Indeed, the regulator continues to battle in court with Ripple Labs, the creator of cryptocurrency XRP, over allegations that the token was offered as an unregistered security. 

Ripple Chief Legal Officer has highlighted that Gensler needs to “recuse himself” from any further enforcement actions on the basis of his prejudgement of outcomes.

Crypto lawyer PSA: Chair Gensler has again proclaimed that every cryptocurrency, except BTC, is an unregistered security. He now must recuse himself from voting on any enforcement case that raises that issue since he has prejudged the outcome. Antoniu v. SEC (8th Cir. 1989)

— Stuart Alderoty (@s_alderoty) February 27, 2023

Elsewhere, the regulator has sued numerous entities and individuals, striking settlement deals with a number of them amid a growing environment of enforcement actions.

SEC Chair’s stance “not the law”

Sotiriou says the SEC taking the current path could see it lose ground relative to the number of new crypto tokens coming into use across the industry. Ideally, the number of tokens the SEC wants registered as securities are more than 9,000.

“I think we need to ask what the SEC’s capacity to prosecute digital asset trading companies is. If they were able to prosecute less than 500 companies, they will probably be losing ground relative to new tokens being created,” Sotiriou noted.

If it cannot prosecute all the companies it might be targeting, the regulator might have to “prioritise.” But how does the watchdog determine who to sue and who not to? According to the analyst, this might come down to the SEC’s opinion – which isn’t the law.

“Ultimately, Gensler’s opinion is not the law, and every case the SEC brings up has to be proven in court. The longer this uncertainty is in limbo though, the worse it is for the whole industry,” he added.