The cryptocurrency industry is eagerly anticipating the upcoming U.S. presidential election, hoping for a win by a candidate who might adopt a more lenient stance on enforcement, potentially ending the ongoing clashes with the Securities and Exchange Commission (SEC).
Former President Donald Trump has recently shown more support for the $2.5 trillion crypto market, even hosting a Bitcoin-focused fundraiser on July 27. Though he criticized cryptocurrencies during his presidency, his recent remarks have been more favorable. Legal experts suggest that if Trump wins, the SEC might scale back its aggressive pursuit of the digital-asset sector.
Michael Selig, a partner at Willkie Farr & Gallagher LLP, commented, “A Trump administration would likely seek to reset and rethink the SEC’s crypto regulatory policy. This reset would likely involve resolving ongoing enforcement actions and investigations initiated by the current administration.”
Under President Joe Biden, the SEC has intensified its scrutiny of the crypto industry, particularly after the collapse of the FTX exchange in 2022. The regulator has initiated numerous enforcement cases, often accusing exchanges and broker-dealers of failing to register under securities law. SEC Chair Gary Gensler has consistently argued that most cryptocurrencies are securities and should be registered accordingly. However, many crypto companies either contest that their tokens are securities or find the registration requirements unclear.
While the SEC has resolved some cases, litigation involving major firms like Kraken, Coinbase, and Binance is still ongoing. The SEC has also concluded some investigations, including those involving Ethereum and BUSD, a Binance-branded cryptocurrency issued by Paxos.
These varied outcomes have left open the question of whether certain tokens are securities. The SEC’s lawsuit against Ripple Labs Inc. could provide some clarity. The agency alleged that Ripple conducted an unregistered securities offering through the sale of XRP tokens, raising over $1.3 billion. A federal judge ruled last July that sales of XRP to retail investors on exchanges did not constitute investment contracts, a decision seen by many as a setback for the SEC.
Ripple CEO Brad Garlinghouse recently predicted a resolution to the case “very soon” in an interview.
The SEC filed the Ripple lawsuit in 2020 while Trump was still in office, but Trump has not detailed his views on crypto regulation since then. However, many in the industry expect less enforcement activity if he is re-elected. Austin Campbell, a blockchain consultant and adjunct professor at Columbia Business School, noted, “If Trump gets elected, the Republicans can immediately change the SEC chair. This could mean many ongoing cases could be settled instead of proceeding in court.”
However, it is uncertain whether Trump will win the election or what his precise policy stance will be. He is currently leading in polls, but speculation remains that Biden may step aside for another Democratic candidate. The potential outcome of such a scenario remains unclear.
Some experts are skeptical that the SEC would drop or settle ongoing litigation even if Trump wins. Emily Meyers, general counsel at venture capital firm Electric Capital, stated, “Securities enforcement cases are typically apolitical, and there’s little staff turnover due to political changes. It’s unlikely ongoing cases get dropped, especially those already in federal court.”
Ji Kim, chief legal and policy officer at the Crypto Council for Innovation, echoed this sentiment, stating, “If Trump were re-elected and Gensler steps down, we might see a change in the current regulation-by-enforcement approach. However, this would depend on the new leadership and the composition of the commissioners — nothing is guaranteed.”
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