Despite significant dissatisfaction from the crypto industry, SEC Chairman Gary Gensler still has the ability to initiate multiple actions before leaving office.

Written by: Veronica Irwin

Translated by: Shan Ouba, Golden Finance

Despite significant dissatisfaction from the crypto industry, SEC Chairman Gary Gensler still has the ability to initiate multiple actions before leaving office, but reports suggest that these measures may soon be rescinded.

The crypto market rebounded significantly after Donald Trump won the U.S. presidential election. Investors are filled with anticipation that this self-proclaimed "friend of crypto" will lead the country for four years, and with the Republican Party controlling the Senate and potentially the House of Representatives, the crypto industry is confident about the next four years. Currently, the biggest political concern for the blockchain community is what actions Gensler will take in the 75 days before Trump is sworn in on January 20.

Trump has promised to immediately remove Gensler from his position upon taking office, and experts are divided on whether Gensler will deliver a "devastating blow" to the crypto industry during his remaining term or choose to "lay down arms." However, most experts agree that Trump's successor will have the authority to halt existing investigations, lawsuits, and even new rule-making.

"Any enforcement action he initiates can be rescinded," said Jonathan Padilla, CEO of Web3 marketing tool company Snickerdoodle Labs and an active Democrat. "Any new rules can also be overturned by the new chair or new Congress." Padilla stated, "Basically, everything can be rescinded within 100 days."

Despite Trump's repeated promises to "fire" Gensler on the first day of the new administration due to Gensler's hostile attitude towards the crypto industry and "enforcement-style regulation," Trump may not be able to legally remove Gensler from the SEC commissioners entirely. However, he could demote Gensler to a regular commissioner, significantly reducing his authority. Typically, SEC chairpersons appointed by the president voluntarily resign when a new administration takes office, but when Fox News reporter Eleanor Terrett asked Gensler if he planned to resign before Trump took office, the SEC spokesperson declined to comment.

The SEC did not immediately respond to inquiries regarding this article.

Gensler's Possible Actions

Trump may appoint a new chair with a completely different stance, which could prompt Gensler to impose stricter regulations on the crypto industry in his final days. Jack Chewinski, Chief Legal Officer of Variant Fund, warned that "when new leadership takes over federal agencies, crypto policy will change immediately and significantly." He stated on the X platform, "Before that, the current administration may be busy finalizing rule-making and initiating enforcement actions."

However, others, like Padilla, speculate that Gensler may quietly serve out the remainder of his term. Sources familiar with the SEC's internal situation indicate that Gensler's staff may slow down any actions he wishes to take, undermining his ultimate influence.

If Gensler decides to take significant action, he has several options. For example, he could unilaterally initiate new investigations into companies deemed to be violating securities laws, potentially manifested through the issuance of new Wells notices or subpoenas. If Gensler can gain the support of other Democratic-appointed commissioners, he may also file lawsuits against some companies that have already received Wells notices, such as crypto gaming company Immutable, NFT platform OpenSea, and stock and crypto trading platform Robinhood.

However, Gensler does not have enough time to resolve any new legal lawsuits or complete new rule-making before January 20, as both processes typically take months. Once the new SEC chair takes office, they will have the authority to suspend or abandon such lawsuits.

Gensler also has the power to further advance rule-making that has already been proposed and completed the public comment process. For example, he could finalize the SEC's update on the definition of "exchange," expanding the registration requirements for market makers (including some crypto businesses).

However, supporters of the crypto industry may also file lawsuits against these new rules. Meanwhile, Congress can use the Congressional Review Act to overturn these rules as long as it acts within 60 days of the session's start. Therefore, if Gensler passes new rules before January 20, the early congressional session of the next administration will be occupied.

For rules not overturned by Congress within 60 legislative days, the new SEC chair can also gradually rescind them. However, this will be a longer process, as the SEC will need to follow the public comment process under the Administrative Procedure Act to create new rules to repeal those approved by Gensler.

Although uncommon, there is indeed a historical precedent for the SEC taking action during the transition between a newly elected president and their inauguration. For example, the Trump administration filed a lawsuit against Ripple on December 22, 2020 (just before the end of its term), despite the SEC being less politicized at the time, and this move may not have been unrelated to the differing stance of the incoming SEC chair under Biden.

Sources indicate that the SEC's enforcement actions are rarely so strongly influenced by political factors, and speculation about how Gensler will handle crypto matters in his final moments is unprecedented. An insider experienced in dealing with SEC lawsuits explained, "This reflects Gary's anti-crypto stance during his term. The SEC's enforcement strategy has never been as constrained by presidential elections as it is today."

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