SEC Director Grewal: A Decade's Worth Of Crypto Arguments Defeated In Court, Now Let's Protect Investors

SEC’s enforcement director Gurbir Grewal on Wednesday reiterated the SEC’s unwavering stance on the application of federal securities laws to the cryptocurrency industry, amid a string of court decisions upholding the watchdog’s authority to regulate crypto assets.

What Happened: In an address to attendees at a PLI event, Grewal pointed out that the forthcoming discussions by his colleagues from the Enforcement Division would shed light on pivotal issues and enforcement initiatives, thereby aiding legal professionals in better advising their clients.

In his elucidation of the “why” behind the SEC’s enforcement actions, Grewal addressed the challenges faced by the regulator, including skepticism regarding its authority and motivations.

“In the decade since we brought our first crypto enforcement actions, our approach has been consistent, principled, and tethered to the federal securities laws and legal precedent,” said Grewal.

He referenced the Howey test as the established criterion for determining whether a crypto asset constitutes an “investment contract” and hence a security, dismissing alternative tests proposed by the industry.

Despite innovative attempts by some market participants to evade the SEC’s jurisdiction, Grewal highlighted that such efforts have been overwhelmingly repudiated by courts.

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He conveyed, “A decade's worth of arguments that have served as nothing more than a distraction from the very real issues and risks that the crypto markets present for the investing public.”

Grewal further cited a federal court’s affirmation of the SEC’s authority to regulate crypto assets as securities, emphasizing the continuity of securities laws’ applicability.

Reflecting on the consequences of non-compliance within the crypto industry, Grewal referenced recent SEC actions, including the sentencing of Samuel Bankman-Fried and charges against individuals involved in a crypto Ponzi scheme.

These cases, according to Grewal, highlight the dire impacts of fraudulent activities on investors, underscoring the necessity of stringent enforcement.

What’s Next: Grewal’s speech, which preemptively sets the tone for critical discussions on crypto regulation and enforcement, is anticipated to be a focal point at Benzinga’s upcoming Future of Digital Assets conference on Nov. 19.

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