Author: Veronica Irwin Source: unchainedcrypto Translator: Shan Ouba, Jinse Finance
Despite the crypto industry's dissatisfaction, SEC Chairman Gary Gensler still has the ability to initiate multiple actions before leaving office, but reports indicate that these measures may be quickly revoked.
After Donald Trump's victory in the US presidential election, the crypto market rebounded significantly. Investors are full of expectations for this self-proclaimed "crypto-friendly" president to lead the country for four years, coupled with the Republican control of the Senate and the likely control of the House of Representatives, making the crypto industry confident about the next four years. Currently, the crypto community's biggest political concern is what measures Gensler will take in the 75 days before Trump's inauguration on January 20.
Trump has promised to immediately dismiss Gensler after taking office, and experts are divided on whether Gensler will "devastatingly attack" the crypto industry during his remaining term or choose to "lay down his weapons". However, most experts believe that Trump's successor will have the right to stop existing investigations, lawsuits, and even new rulemaking.
"Any enforcement actions he initiates can be revoked," 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 president or the new Congress." Padilla said, "Basically, everything can be revoked within 100 days."
Although Trump has repeatedly promised to "fire" Gensler on the first day of the new administration due to Gensler's hostile attitude towards the crypto industry and his "enforcement-style regulation" approach, Trump may not be able to legally remove Gensler from the SEC commission. However, he can demote Gensler to an ordinary commissioner, significantly reducing his authority. Normally, the SEC chairman appointed by the president will voluntarily resign when the new administration takes office, but when Fox News reporter Eleanor Terrett asked Gensler if he plans to resign before Trump takes office, the SEC spokesperson did not comment.
The SEC did not immediately respond to inquiries about this article.
Gensler's Potential Actions
Trump may appoint a new chairman with a completely different stance, which may prompt Gensler to impose even stricter regulations on the crypto industry in his final days. Jack Tewksbury, Chief Legal Officer of Variant Fund, warned that "crypto policy will change immediately and significantly when the new leadership takes over the federal agency." He stated on the X platform that "before that, the current administration may be busy finalizing rulemaking and initiating enforcement actions."
However, others, such as Padilla, speculate that Gensler may quietly serve out the remainder of his term. Sources familiar with the SEC's internal situation say Gensler's staff may slow down the implementation of any actions he wishes to take, diminishing his ultimate impact.
If Gensler decides to take major actions, he has several options. For example, he can unilaterally initiate new investigations against companies believed to have violated securities laws, which may be reflected in 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 the crypto gaming company Immutable, the Non-Fungible Token (NFT) platform OpenSea, and the stock and crypto trading platform Robinhood.
However, Gensler does not have enough time to resolve any new legal disputes or complete new rulemaking before January 20, as these two processes typically take months. Once the new SEC chairman takes office, they will have the right to shelve or abandon such lawsuits.
Gensler also has the power to further advance rules that have already been proposed and completed the public comment process. For example, he can finalize the SEC's updates to the definition of "exchange", expanding the registration requirements for market makers (including some crypto businesses).
However, crypto industry supporters may also sue against these new rules. Meanwhile, Congress can use the Congressional Review Act to overturn these rules, as long as Congress takes action within the first 60 days of the session. Therefore, if Gensler passes new rules before January 20, the early days of the next administration's Congress will be occupied.
For rules not overturned by Congress within 60 legislative days, the new SEC chairman can also gradually revoke them. However, this will be a longer process, as the SEC will need to follow the public comment procedures of the Administrative Procedure Act to establish new rules to repeal the rules approved by Gensler.
Although rare, there are historical precedents of the SEC taking action during the transition period between a new president's election and inauguration. For example, the Trump administration filed a lawsuit against Ripple on December 22, 2020, near the end of its term, even though the SEC's politicization was relatively low at the time and this move may not be related to the incoming SEC chairman under Biden.
Sources say it is rare for SEC enforcement actions to be so strongly influenced by political factors, and the speculation about how Gensler will handle crypto matters in his final days is unprecedented. This source, experienced in dealing with SEC lawsuits, explained, "This reflects Gary's anti-crypto stance during his tenure. The SEC's enforcement strategy has never been as subject to presidential elections as it is today."
