Gary Gensler's Legacy: Regulation by Enforcement Lives On

As Gary Gensler's tenure as Chair of the U.S. Securities and Exchange Commission (SEC) comes to an end, his era of 'egulation by enforcement' is far from over. Despite the departure of Gensler, the SEC's aggressive approach to crypto regulation is likely to continue under his successor, Paul Atkins. In this article, we will explore why Gensler's legacy of regulation by enforcement will persist and how it will impact the crypto industry under Atkins' leadership.



Gensler's SEC has been actively pursuing enforcement actions against crypto firms for failing to register their tokens as securities. These actions have been supported by the Howey test, which defines an investment contract and thus a security. Gensler's SEC has also taken enforcement actions against large exchanges like Coinbase and Kraken for similar reasons. This aggressive approach to crypto regulation has been criticized by some in the industry for being too heavy-handed and not engaging enough with the sector.

However, Gensler's departure does not mean that the SEC's enforcement actions against crypto firms will cease. In fact, the SEC has been ramping up enforcement actions in the weeks leading up to Gensler's departure, as evidenced by the Wells Notices sent to Unicoin and CyberKongz. This suggests that the agency is committed to holding crypto firms accountable for failing to comply with the securities laws, regardless of who is leading the agency.

Moreover, Atkins, a pro-crypto advocate who previously served on the board of the Digital Chamber of Commerce, has stated that he supports the involvement of crypto firms in the regulatory process. However, he has also indicated that the SEC's enforcement actions against fraudulent actors are welcomed by legitimate actors in the space. This suggests that Atkins will continue to enforce the securities laws against crypto firms that fail to register their tokens as securities.



Atkins' tenure at the SEC is expected to differ from Gensler's approach to crypto regulation in several ways. First, Atkins has emphasized the importance of increased public input from crypto firms in the regulatory process. This is a departure from Gensler's approach, which has been criticized by some in the industry for being too heavy-handed and not engaging enough with the sector. Second, Atkins has consistently favored strategies that allow firms to raise public funding and foster innovation. This suggests that he will be more likely to conduct thorough cost-benefit analyses before implementing new regulations, unlike Gensler's more aggressive approach. Finally, Atkins has been a longtime critic of overregulation and has consistently favored strategies that align with the SEC's legislative mandate. This indicates that he will be more focused on staying within the bounds of the agency's authority, unlike Gensler, who has been criticized for overreaching.

In conclusion, Gensler's legacy of regulation by enforcement is likely to continue under Atkins' leadership at the SEC. While Atkins' approach to crypto regulation may differ from Gensler's in some ways, such as increased public input and a greater emphasis on cost-benefit analyses, the SEC's enforcement actions against crypto firms for failing to register their tokens as securities are likely to continue. This is because Atkins has indicated his support for the SEC's enforcement actions against fraudulent actors and has not given any indication that he will reverse the enforcement actions taken by Gensler's SEC. Therefore, crypto firms should continue to expect a high level of scrutiny and enforcement from the SEC under Atkins' leadership.