Washington, D.C. (June 29, 2023) — Today, Blockchain Association published a paper explaining the legal argument for why Securities and Exchange Commission (SEC) Chair Gary Gensler must recuse himself from any decisions about the initiation or continuation of an enforcement action premised on the theory that a digital asset is a security.
Chair Gensler has repeatedly asserted his public view that “everything other than bitcoin” is a security, a statement that creates, at minimum, the appearance that he would not approach this issue with an open mind. In repeatedly expressing this view, it is clear Chair Gensler has prejudged the central issue in digital asset-related enforcement proceedings. His vote as to whether or not to proceed with filing an action is therefore tainted with bias and violates investigation targets’ due process rights. Critical to due process, every SEC enforcement action must follow the “Wells process,” which gives the target of the enforcement action an opportunity to present evidence and arguments in their defense. If staff wish to proceed with filing an action at the end of the Wells process, they must present evidence to the Commissioners, who then vote on whether to proceed. Without an unbiased perspective, core questions that matter to the digital assets industry will not receive a fair assessment with Chair Gensler presiding.
The SEC has lately ramped up its enforcement actions against leading digital asset companies, leading many to conclude that the agency is pushing for a de facto ban on digital assets in America. While this anti-crypto campaign has intensified, the SEC has let slide one of its fundamental tasks: public rulemaking and guidance that allow investors, entrepreneurs, and the public to know whether the securities laws apply to their products or services. Rather than clarifying whether and when a digital asset should be classified as a security, Chair Gensler’s actions have further muddied the regulatory waters, forcing lawful crypto companies to reconsider the status of their American operations.
The following statement is attributed to Jake Chervinsky, Blockchain Association Chief Policy Officer:
“It’s clear that the digital assets industry cannot expect a fair assessment from Chair Gensler. His steadfast view that all digital assets except bitcoin are securities means that he cannot approach enforcement decisions with a fair and impartial mind, as required by the SEC’s Wells process and federal law. The time has come for Chair Gensler to recuse himself from all decisions related to digital asset-related enforcement matters. If he refuses, then I expect enforcement targets will begin raising the matter of his recusal in SEC proceedings and in federal district courts.”
Jake Chervinsky and BA Senior Counsel Marisa Coppel published a paper explaining the legal case for why Chair Gensler must recuse himself from digital asset-related enforcement decision making.