On Thursday (June 8, 2023), Gary Gensler, the Chair of the U.S. Securities and Exchange Commission (SEC), defended the agency’s recent enforcement actions against leading crypto exchanges, Coinbase and Binance. According to a report by CoinDesk, his comments were made during a speech at the Piper Sandler Global Exchange & FinTech Conference.
Gensler addressed the argument that some crypto assets provide utility beyond being an investment vehicle. He emphasized that the presence of additional utility does not exempt a cryptoasset security from being classified as an investment contract.
“Some additional utility does not remove a crypto asset security from the definition of an investment contract … The investing public generally buys these crypto assets, at least in part, anticipating profit based on the efforts of those token issuers.“
However, he also acknowledged that tokens designed exclusively for use within their blockchain ecosystems could potentially be exempt from such classification.
The SEC Chair also refuted that the crypto sector was not given fair notice about potential illegal conduct, suggesting that such claims might be a calculated business decision to risk enforcement action:
“When crypto asset market participants go on Twitter or TV and say they lacked ‘fair notice’ that their conduct could be illegal, don’t believe it … They may have made a calculated economic decision to take the risk of enforcement as the cost of doing business.“
Gensler’s comments underscore the SEC’s stance that the rules of traditional finance apply equally to the crypto sector.
Furthermore, Gensler dismissed the idea that crypto platforms can’t register with the SEC. He argued that compliance is possible, though it requires effort and a willingness to make necessary changes to align with securities laws.