Lawyers criticize Gensler's assertion that all cryptos are securities

In recent times, digital currency lawyers have strongly criticized Gary Gensler, the United States Securities and Exchange Commission (SEC) head, for his recent comments that all cryptocurrencies, except bitcoin (BTC), are securities under the agency’s jurisdiction.

In an interview with New York Magazine on Feb. 23, Gensler stated that “everything other than bitcoin” falls under the SEC’s remit because these projects involve a group in the middle, and the public anticipates profits based on that group.

The lawyers rebuffed Gensler’s opinion, stating that it is not legally binding and that the determination of whether a cryptocurrency is a security depends on the specific circumstances of each case. The lawyers argued that Gensler’s comments could create confusion and uncertainty in the market and that the SEC should provide clear guidance on regulating cryptocurrencies.

Gensler’s remarks have been met with backlash from the crypto community, which believes that his comments could stifle innovation and investment in the industry.

Gensler in @NYMag on crypto:

-everything is a security except bitcoin
-every company out there is in violation
-crypto is pointless but blockchain is kinda neat

Hard to argue you’re acting in good faith if admittedly trying to stamp out an entire industry. pic.twitter.com/Ozw8ZJ3ETO

— Alexander Grieve (@AlexanderGrieve) February 26, 2023

In a tweet on Feb. 26, Jake Chervinsky, a lawyer and policy lead at Blockchain Association, a crypto advocacy group, contested Gensler’s authority in the crypto sector, stating that his opinion is not the law, despite his claimed command over the industry.

Chervinsky’s remarks highlight the ongoing debate within the legal community regarding regulating cryptocurrencies and the extent of the SEC’s jurisdiction over the market.

Chair Gensler may have prejudged that every digital asset aside from bitcoin is a security, but his opinion is not the law. The SEC lacks authority to regulate any of them until and unless it proves its case in court. For each asset, every single one, individually, one at a time.

— Jake Chervinsky (@jchervinsky) February 26, 2023

While Gensler’s recent comments have generated controversy and uncertainty in the industry, many experts believe that clear and comprehensive regulatory guidance is necessary to ensure the long-term viability and growth of the crypto sector.

Lawyer Logan Bolinger weighed in on the issue, stating in a tweet that Gary Gensler’s opinions on the classification of securities in the crypto industry are not legally dispositive, meaning that they do not constitute the final legal determination on the matter.

Friendly reminder that Gensler’s opinions on what is or isn’t a security are not legally dispositive.

In this country, judges – not SEC chairs – ultimately determine what the law means and how it applies.

Doesn’t mean his thoughts are irrelevant. They’re just not dispositive.

— Logan Bolinger (@TheWhyOfFI) February 26, 2023

Jason Brett, the policy lead at Bitcoin Policy Institute, expressed concern over Gensler’s comments and suggested they should not be celebrated but feared instead. Brett also emphasized that there are alternative approaches to achieving success in the crypto industry besides relying on a regulatory moat.

The Gary Gensler thing is no bueno. There are ways to win other than via a regulatory moat. And anytime this is the way, the script can be flipped and before you know it, everyone is crying due process. Gensler’s comments in NY Magazine shouldn’t be celebrated, but feared.

— Jason Brett (@RegulatoryJason) February 26, 2023

Gabriel Shapiro, the general counsel at Delphi Labs, highlighted the challenging enforcement that the SEC would face asserting its authority over the crypto industry. Shapiro estimated that based on Gensler’s recent statements, the agency would need to file lawsuits against over 12,300 token creators, responsible for around $663 billion worth of unregistered securities considered illegal in the US.

Despite Gensler’s claims, many token creators find SEC registration prohibitively expensive, and the need for a clear path for token registration poses a significant challenge. Numerous novel and unresolved questions exist, such as whether every protocol change constitutes a new offering and no clear roadmap for how to proceed.