In a recent Senate Committee on Appropriations hearing, Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (SEC), made a case for increased funding for the agency. Gensler argued that the SEC needed an additional $72 million to bolster its staff and enhance its ability to regulate the rapidly evolving crypto industry, which he described as “rife with noncompliance.”
The SEC Chairman’s request for additional funding was met with mixed reactions from lawmakers. Senator Richard Durbin (D-IL) questioned whether the SEC had sufficient resources to police the crypto industry. On the other hand, Senator Bill Hagerty (R-TN) expressed concern that the SEC’s unclear rules and “regulation by enforcement” approach could drive business and innovation offshore.
The most heated exchange occurred between Gensler and Senator John Kennedy (R-La.), who criticized the SEC’s handling of the alleged fraud at the failed crypto exchange FTX. Kennedy questioned why the SEC had not proactively investigated FTX, despite the conspicuous activities of its founder, Sam Bankman-Fried.
Gensler defended the SEC’s actions, stating that the crypto field was fraught with abuses and fraud, often bundled with offshore services, making regulation a complex task. He also highlighted that enforcement actions often take considerable time. In the wake of this exchange, Congressman Dusty Johnson criticized the SEC’s strategy of “regulating by enforcement” in an open letter, arguing that it was hampering innovation and growth in the industry.
Meanwhile, Congressman John Rose introduced H.R. 4657, a bill aimed at restricting the SEC’s ability to enforce what he termed as “moral and social policy.” Rose accused the SEC, under Gensler’s leadership, of overstepping its mandate by imposing its progressive political agendas on retail investors and retirement savings.
Rose’s bill was a response to the SEC’s Staff Legal Bulletin 14-L, which allows significant social policy issues to be included in a proxy statement, even without a nexus between an individual company and the policy. Rose argued that this approach allowed activists to force public companies to take positions on social and political issues.
