Cryptocurrency lawyers have rebuffed comments made by the head of the United States securities regulator, who claimed in a recent interview that every cryptocurrency except Bitcoin (BTC) is a security that falls under its jurisdiction.
In a wide-ranging Feb. 23 New York Magazine interview discussing crypto, Securities and Exchange Commission Chair Gary Gensler claimed “everything other than Bitcoin” falls under the agency’s remit.
He added other crypto projects “are securities because there’s a group in the middle and the public is anticipating profits based on that group,” which he said is not the case with Bitcoin.
Jake Chervinsky, a lawyer and policy lead at the crypto advocacy group the Blockchain Association, argued however in a Feb. 26 tweet that Gensler’s “opinion is not the law” despite his claimed command over the crypto sector.
He added “until and unless” the SEC “proves its case in court” for its jurisdiction over each individual token “one at a time” then it “lacks authority to regulate any of them.”
Lawyer Logan Bolinger also chimed in, tweeting on Feb. 26 “that Gensler’s opinions on what is or isn’t a security are not legally dispositive” — meaning it’s not the final legal determination.
“Judges — not SEC chairs — ultimately determine what the law means and how it applies,” Bolinger added.
The policy lead at advocacy body Bitcoin Policy Institute, Jason Brett, said Gensler’s comments “shouldn't be celebrated, but feared” and stated, “there are ways to win other than via a regulatory moat.”
SEC needs 12,305 lawsuits: Delphi Labs counsel
Meanwhile, Gabriel Shapiro, the general counsel at investment firm Delphi Labs, outlined in a series of tweets the seemingly impossible enforcement that the SEC would have to carry out on the industry to cement its rule.
Shapiro said that over 12,300 tokens worth around $663 billion are — according to Gensler — unregistered securities that are illegal in the U.S. and, as mentioned by Chervinsky, the agency would have to file a lawsuit against each token creator.
The SEC has handled crypto in two main ways, according to Shapiro: Either fining token creators and requiring the issuer to register, or fining them and ordering the created tokens to be destroyed and delisted from exchanges.
“SEC registration is not only too expensive for most token creators — there is also no clear path for registration of tokens,” Shapiro said, adding:
“What is the plan here? Since registration is not feasible, it can only be [that] everyone pays huge fines, stops working on the protocols, destroys all dev premines, and delists [tokens] from trading. That would mean 12,305 lawsuits.”
“What is the plan? We are all wondering, and billions of American [dollars] are at risk.”