Should
regulators
get
to
determine
the
rules
they
enforce?
To
the
extent
that
federal
watchdogs
—
like
the
Securities
and
Exchange
Commission
(SEC)
and
Commodities
Futures
Trading
Commission
(CFTC)
—
enforce
the
law
acting
with
executive
authority,
mostly
adhere
to
legislation
written
by
congressional
lawmakers,
and
are
kept
in
check
by
the
court
system,
it’s
reasonable
to
say
some
degree
of
autonomy
is
warranted.
This
is
an
excerpt
from
The
Node
newsletter,
a
daily
roundup
of
the
most
pivotal
crypto
news
on
CoinDesk
and
beyond.
You
can
subscribe
to
get
the
full
newsletter
here.
But
when
it
comes
to
potentially
novel
technology
and
business
practices,
regulatory
self-determination
can
impede
a
new
and
emerging
industry’s
ability
to
advance.
Crypto
proponents,
for
instance,
think
distributed,
self-executing
ledgers
are
disruptive
enough
(in
a
good
way)
to
warrant
bespoke
rules.
It’s
old
news
that
SEC
Chair
Gary
Gensler
disagrees.
Gensler
has
said
repeatedly
that
99.99999999%
of
crypto
tokens
are
securities
—
his
domain
—
and
that
the
supposed
innovations
of
blockchain
are
just
new
ways
of
doing
old
things.
And
so,
Gensler
has
been
applying
existing
rules
and
regulations
to
rein
in
an
industry
that
has
become
a
hotbed
for
fraud
as
well
as
financial
experimentation.
Today
is
no
different.
In
a
new
filing
in
the
SEC’s
ongoing
legal
imbroglio
with
Coinbase,
the
executive
agency
reaffirmed
its
stance
that
it
has
the
“discretion
to
determine
the
timing
and
priorities
of
its
regulatory
agenda.”
Gensler,
in
a
press
release,
added
that
the
current
law
“appropriately
governs
crypto
asset
securities.”
This
filing
came
in
response
to
Coinbase’s
petition
to
the
SEC
in
2022
for
new
“rulemaking”
tailored
to
blockchain,
which
turned
into
a
lawsuit,
filed
by
the
largest
U.S.
exchange
in
2023
after
it
didn’t
hear
back
from
the
agency.
Coinbase
had
asked
a
U.S.
judge
to
force
the
SEC’s
hand
to
write
new
rules
or
at
the
very
least
respond
to
the
exchange’s
petition.
So
is
the
SEC’s
response
adequate?
The
agency
said
Coinbase’s
ask
was
“unworkable,”
but
really
doesn’t
elaborate.
In
a
two-pager,
the
SEC
pointed
out
that
it
has
“broad
discretion”
to
act
(citing
a
2007
Supreme
Court
case,
Massachusetts
v.
EPA),
that
it
“benefits
from
engagement
with
market
participants”
and
that
it
“may
undertake
further
consideration
of
issues
raised
in
the
Petition.”
However,
the
SEC
did
not
say
anything
detailed
to
the
question
of
why
it
considers
cryptocurrencies
to
be
securities,
or
Coinbase’s
specific
desire
to
create
clear
“disclosure
requirements
for
offers
and
sales
of
crypto
asset
securities.”
The
closest
the
agency
got
to
something
like
this
was
when
it
brought
up
the
fact
it
is
engaged
in
“numerous”
regulatory
enforcement
actions
brought
against
crypto
industry
“participants.”
(I
guess
those
are
“engagements”
it
“benefits”
from,
considering
many
crypto
companies
said
they
found
Gensler’s
“open
door”
closed?)
In
fact,
in
a
remarkable
bit
of
circular
reasoning,
the
SEC
specifically
notes
that
its
view
on
cryptocurrency
is
informed
by
“data
and
information”
gleaned
from
the
legal
“undertakings
…
the
Commission
is
currently
pursuing.”
In
other
words:
The
SEC,
which
is
pursuing
securities
charges
against
crypto
firms,
cannot
consider
changing
the
rules
that
uphold
those
legal
actions,
because
of
information
it
has
learned
pursuing
those
cases.
But
what
if
those
legal
actions
were
never
justified
in
the
first
place?
This
wouldn’t
be
the
first
time
the
SEC
was
self-referential
in
matters
of
law.
In
its
recent
lawsuit
against
Kraken,
the
SEC
cited
the
fact
the
crypto
exchange
had
listed
tokens
the
agency
previously
called
securities
in
its
similar
actions
brought
against
Binance
and
Coinbase.
However,
so
far,
the
SEC
hasn’t
truly
determined,
absolutely-matter-of-factly
whether
any
token
is
a
security.
“I
know
Gary
says
the
vast
majority
of
tokens
are
securities,
but
so
far
that
has
not
been
the
finding
of
most
courts
the
SEC
has
been
interacting
with,”
Columbia
Business
School
professor
and
former
Paxos
fund
manager
Austen
Campbell
told
CoinDesk
in
an
interview.
Campbell
noted
Judge
Torres’
decision
in
the
SEC’s
lawsuit
against
Ripple
that
drew
a
clear
distinction
between
the
“investment
contract”
Ripple
made
with
institutional
buyers
of
XRP
and
the
token
itself,
which
was
not
found
to
be
a
security.
This
is
to
say
nothing
of
the
Administrative
Procedures
Act
(APA),
which
might
limit
the
SEC’s
“broad
discretion”
to
act
at
all
without
Congress’s
prior
consent.
So
does
the
SEC’s
decision
Friday
matter?
To
be
honest,
it
seems
like
more
of
the
same:
An
agency
that
has
some
autonomy
continuing
to
treat
crypto
the
way
it
wants.
It
could
be
said
in
this
Age
of
Vibes
we
live
in
—
where
meme
coins
top
the
charts,
inflation
is
felt
more
than
measured
and
when
investment
decisions
are
made
on
gut
—
that
Gensler
is
the
vibiest
hypebeast
of
them
all,
making
the
call
that
tokens
are
securities
not
on
the
basis
of
sound
logic,
but
because
that
is
what
he
feels
deep
down.
When
Coinbase
asked
for
new
rulemaking
in
2022,
its
chief
policy
officer
Faryar
Shirzad
wrote
a
detailed
blog
post
noting
that
“securities
rules
simply
do
not
work
for
digitally
native
instruments.”
He
cited
things
like
tokenized
debt
and
equity,
utility
tokens
and
non-fungible
tokens.
It’s
clear
enough
that
crypto
is
used
for
investments,
and
so,
there
is
likely
a
role
for
the
SEC
to
play
in
overseeing
the
industry
and
helping
keep
investors
safe.
Coinbase’s
petition
was
trying
to
figure
out
when
and
where
that
may
be
appropriate,
and
the
SEC
regretfully
declined
to
engage
at
all.
