In the past two years, the crypto industry has faced fines, threats, and lawsuits from Gary Gensler and the Securities and Exchange Commission (SEC), which has reeled space. But a pair of recent legal setbacks have the agency on the defensive.
The most stinging defeat for the SEC came on Tuesday when an appeals court overturned it decision to block Grayscale Investments LLC’s proposed spot Bitcoin exchange-traded fund. The ruling cracks open the door for a suite of products the regulator has deemed unsafe for retail investors.
However, the SEC may still appeal the ruling.
“We are reviewing the court’s decision to determine the next steps,”
The SEC
“It is back in the SEC’s court,” said Dan Berkovitz, who was general counsel at the agency until early this year.
The regulator is yet in on another fight with a lower-court ruling over Ripple’s XRP token sales, which risks undercutting some of the agency’s jurisdiction over crypto.
Regardless of the path, the agency will have to justify its decisions in a manner it has not previously.
SEC’s Justification
Under Gensler, the SEC has claimed many crypto products should be registered with the agency. On Monday, the regulator settled its first case over nonfungible tokens (NFTs).
The SEC chief has consistently justified the stance as necessary to protect investors from an industry that he says is rife with fraud.
Critics, including lawyers representing crypto clients, have argued that the SEC has overstepped under Gensler. Already, some are casting Tuesday’s Grayscale ruling as supportive of that view.
After Tuesday’s ruling, the SEC is now faced with several options: appeal the decision, grant Grayscale’s application to list its Bitcoin spot ETF, let it be automatically approved by doing nothing, or start a new, second effort to reject the application based on fresh objections.
We shall keep a watchful eye and see how the issue unfolds. We’ll keep you updated.
