Why doesn't the SEC like crypto?

2023 © Wikiask
Main topic: Tech
Other topics: Crypto
Short answer:

SEC officials have repeatedly said that:

  • Most cryptos are securities, subject to SEC regulation
  • Crypto markets lack investor protections and transparency
SEC Chairman Gary Gensler.

The SEC believes that most cryptocurrencies are securities subject to their regulation[edit]

SEC Chairman Gary Gensler has repeatedly said that he believes most cryptocurrencies are securities subject to U.S. federal laws, which define how securities can be issued in primary (issuing) and secondary (trading) transactions[1].

Many in the industry have suggested that he and the Biden administration have been too tough on crypto, but the SEC, even under Gensler's predecessor Jay Clayton (nominated by President Trump), has taken a similar stance. In 2017, the SEC issued an investigative report on "The DAO", alleging that its token were securities subject to U.S. federal laws:

"In light of the facts and circumstances, the agency has decided not to bring charges in this instance, or make findings of violations in the Report, but rather to caution the industry and market participants: the federal securities laws apply to those who offer and sell securities in the United States, regardless whether the issuing entity is a traditional company or a decentralized autonomous organization, regardless whether those securities are purchased using U.S. dollars or virtual currencies, and regardless whether they are distributed in certificated form or through distributed ledger technology."[2]

The SEC alleges crypto markets lack investor protections[edit]

Gensler has also said that cryptocurrency exchanges and lending platforms today are generally unregistered with the SEC, and that this leads investors to not have the same protections as they have from regulated stock broker-dealers.[3]

Protections that the SEC could protect consumers from include:

  • Custody risks (e.g. hacking by third-parties or exchange stakeholders)
  • Conflicts of interest and market integrity (e.g. front-running)[4]
  • Fraud, scammers, and manipulation[5]


  1. Bellusci, Michael (2022-07-19). "SEC's Gary Gensler Sees Plenty of 'Noncompliance' Across Crypto Industry". www.coindesk.com. Retrieved 2022-09-27.
  2. "SEC.gov | SEC Issues Investigative Report Concluding DAO Tokens, a Digital Asset, Were Securities". www.sec.gov. Retrieved 2022-09-27.
  3. "SEC.gov | Kennedy and Crypto". www.sec.gov. Retrieved 2022-09-27.
  4. "SEC.gov | Kennedy and Crypto". www.sec.gov. Retrieved 2022-09-27.
  5. "SEC.gov | Prepared Remarks of Gary Gensler On Crypto Markets Penn Law Capital Markets Association Annual Conference". www.sec.gov. Retrieved 2022-09-27.