SEC Faces Opposition on Crypto Classification As Securities

By: Eva Baxter

Recently, Coinbase's chief legal officer Paul Grewal took a stand against US SEC Chair Gary Gensler's claim that most cryptocurrencies qualify as securities. He argued in a social media post, that several cryptocurrencies do not fit the definition of securities, contrary to Gensler's assertions. The statement was made in response to Gensler's CNBC interview where he maintained that many digital assets fall under existing securities law. Grewal's retort urges the SEC Chair to refrain from misleading the market on this contentious issue.

In the same interview, Gensler reiterated the stance that most cryptocurrencies are securities, asserting they often lack the mandatory disclosures for assets of this class. He did not specify which cryptocurrencies he considers securities, though major tokens excluding Bitcoin are speculated to be under scrutiny. Since taking office as SEC Chair, Gensler has focused on bringing crypto under the commission’s regulatory purview, often citing the Howey test to determine securities status.

Crypto entities like Binance, Coinbase, and Robinhood are currently embroiled in lawsuits with the commission. The SEC has also dispatched Wells Notices to high-profile crypto firms such as Uniswap and Consensys. The CEO of Robinhood expressed concerns on what he calls a 'regulatory onslaught' on crypto, pledging to fight against the SEC's pending enforcement action. Robinhood's conservative approach to digital asset listings has reportedly surprised many industry experts with the SEC's aggressive response.