The SEC is preparing for a high-profile testimony, with all five commissioners set to appear before Congress for the first time since 2019. This comes as SEC Chair Gary Gensler is under fire in a probe for political favoritism.
Gensler’s approach to digital asset regulation has been criticized for being overly aggressive, potentially stifling innovation in the US crypto sector. With the November elections only a few months away, Gensler future in leadership is on the edge.
The SEC will face the Congress
Eleanor Terrett of Fox Business reported that the five-member Securities and Exchange Commission (SEC) will testify before the US House Committee on Financial Services next Tuesday. Reportedly, this is the first time since 2019 that the full commission and the chair will testify together. The SEC commissioner Gary Gensler will appear before the Senate on September 25.Â
The testimony will come at a time when Gensler is struggling to maintain leadership of the securities regulator. Last week, Gensler went under investigation led by Republican lawmakers—Jim Jordan, Patrick McHenry, and James Comer—over allegations of political favoritism.
Gensler’s enforcement actions have been called out
The investigation will check if Gensler or the SEC has been favoring certain political affiliations for key positions within the agency that violate the Civil Service Reform Act of 1978. The lawmakers involved—Jordan, McHenry, and Comer—are influential figures in Republican circles, and they are leading the charge to scrutinize whether Gensler has violated any ethical standards by engaging in potentially biased or politically motivated hiring decisions.
In a September 18 hearing by the Subcommittee on Digital Assets, Financial Technology, and Inclusion, the hearing is also examining the SEC’s handling of digital assets under Chair Gary Gensler. The memo suggests that the SEC’s heavy reliance on enforcement is harming the digital asset sector with witnesses including Michael Liftik, Dan Gallagher, Teddy Fusaro, Jennifer Schulp, and Lee Reiners. They will also discuss the regulatory ambiguities, including the application of the Howey Test to digital assets, in their testimonies.
In her testimony before the US House Committee on Financial Services, Jennifer Schulp from the Cato Institute has criticized the agency’s “politicized” approach to digital assets under the chairman. Schulp argued that the SEC prioritizes enforcement without clear rules. The director added, “The SEC’s approach has subjected U.S. market participants who choose to engage in digital asset-related activities to extreme regulatory and compliance risk.”
Meanwhile, the result of the 2024 US Elections also becomes crucial for Gensler. A Bloomberg report alleges that donors aligned with Vice President Kamala Harris are privately pushing for the removal of SEC Chair Gary Gensler. The crypto community has publicly expressed frustrations with Gensler’s enforcement action in the sector.
