Gary Gensler-Led SEC Moved Forward With Enforcing Crypto Regulation 'Despite Legal Problems,' Commissioner Admits In Hearing

SEC Commissioner Hester Peirce on Tuesday admitted that the agency moved forward with regulatory actions against crypto entities despite being aware of potential legal issues.

What Happened: “We knew ahead of time that there were legal questions about whether we have the authority to do what we did, but we moved forward,” she said at the House Financial Services Committee hearing on Tuesday.

She added that this approach was harmful to the SEC’s institutional integrity, highlighting the agency’s struggles in navigating the regulatory landscape for digital assets.

Rep. Tom Emmer sharply questioned SEC Chair Gary Gensler, accusing him of leading a lawless campaign against the crypto industry. “You’ve abused the agency's enforcement tools and even baited companies eager to comply, only to hit them with enforcement actions,” Emmer said during the hearing.

Also Read: Caitlin Long Says ‘Progressives Are Actually Big-Bank Corporatists’ As Republican Lawmakers Urge SEC To Repeal Crypto Accounting Rule

Why It Matters: Gensler, who has been at the center of the SEC’s push for crypto regulation, defended the agency's actions, pointing to court rulings that affirmed the clarity of the Howey test, which is used to determine what constitutes a security.

"Court after court has said Howey provides clearly expressed tests for determining what constitutes an investment contract,” Gensler said.

He also acknowledged the risks inherent in the crypto industry, including cybersecurity concerns, particularly with exchange-traded funds (ETFs), stating, "The concentration could be a risk, and that’s why competition is good as well.”

Emmer did not hold back in his criticism, accusing the SEC of causing confusion in the market and lacking accountability. "You've made up the term ‘crypto asset security'—it's nowhere in statute. You used this term as the basis for your entire enforcement crusade, only for your lawyers to retract it in court," Emmer said, highlighting the inconsistencies in the SEC's approach to regulation.

“Your inconsistencies on this issue, sir, have set this country back. We could not have had a more historically destructive or lawless chairman of the SEC,” Emmer said.

What’s Next: These ongoing debates and regulatory developments will be a major focus of Benzinga’s Future of Digital Assets event on Nov. 19.

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