U.S. House Passes Bill to Shield Crypto Industry from SEC Overreach

In a significant move, the U.S. House has approved a bill to safeguard the cryptocurrency industry from SEC's regulatory overreach, highlighting a need for clearer guidelines and fair practices.

This article delves into the implications of this bipartisan effort, examining its impact on the crypto community and the ongoing debate over the SEC's role in regulating emerging financial technologies.

Bipartisan Legislation to Protect Cryptocurrency from SEC Enforcement

On November 8, U.S. Representative Tom Emmer (Republican) sharply criticized Gary Gensler, the chair of the Securities and Exchange Commission (SEC), and introduced a bill to protect the cryptocurrency industry from legal enforcement by the SEC.

The amendment to the "Financial Services and General Government Appropriations Act" prohibits the SEC from using funds for enforcement actions against cryptocurrency companies until Congress defines the SEC's jurisdiction.

This bipartisan amendment passed the House without opposition.

Representative Emmer strongly criticized Chairman Gensler, calling him "ineffective and incompetent," and stated:

Regulation by enforcement is a practice all too common with this administration.

This is particularly the case at the SEC and Chair Gary Gensler’s approach towards our capital markets and financial services industry, but especially with our emerging digital assets community.

My amendment seeks to put an end to Chair Gensler’s pattern of regulatory abuse, a pattern that is crushing American innovation and capital formation, without undermining our ability to go after criminals and fraudsters.

SEC under Gensler Targets Major Crypto Exchanges

The SEC, led by Gary Gensler, has sued various companies, including major cryptocurrency exchanges like Coinbase and Binance, for offering "unregistered securities."

However, the lack of clear guidelines on what constitutes a security has led to criticism that these decisions are made arbitrarily.

In September, Representative Ritchie Torres criticized the SEC's potentially infinite interpretation of securities, even asking Gensler if "tokenized Pokémon cards" are considered securities.

Criticizing the SEC's Oversight Failures

Representative Emmer pointed out, "How can the industry comply when there are no rules or guidelines to follow?"

He also continued that while the SEC pursues publicly traded companies like Coinbase, which are trying to advance innovation in the U.S., it overlooked companies like FTX that were actually engaging in fraudulent activities.

This criticism follows suspicions that Gensler had a meeting with Sam Bankman-Fried, former CEO of FTX, in March 2022 before FTX's collapse, possibly discussing "No-Action Relief."

No-Action Relief allows companies under SEC supervision to obtain certain assurances when their actions might touch on regulatory gray areas.

Court and GAO Decisions Unfavorable to SEC

Emmer also mentioned recent court decisions and views from the U.S. Government Accountability Office (GAO) that are unfavorable to the SEC. For example, a district court's partial ruling in the Ripple vs. SEC case stated that "the cryptocurrency XRP in itself is not a security."

Additionally, in a lawsuit concerning Grayscale's application to convert GBTC into an ETF, a judge ruled that the SEC's refusal to approve a physical Bitcoin ETF application was "arbitrary and capricious."