Here’s Why Crypto Hates Gary Gensler

The crypto industry has spent hundreds of millions of dollars on this year’s elections.

by Eric Gardner, More Perfect Union

Former President Donald Trump’s idea to turn America into a cryptocurrency powerhouse received some applause from the 35,000 attendees at last July’s Bitcoin Conference, but the crowd erupted when he promised to fire Securities and Exchange Commission (SEC) Chairman Gary Gensler on his first day in office.

“I didn’t know he was that unpopular,” Trump said, before repeating: “On day one I will fire Gary Gensler.” Trump said only three years ago that crypto was a “scam” that should be regulated “very, very high,” but along with his sons and business associates, he founded a new crypto venture called World Liberty Financial last month.  

The crowd’s reaction encapsulated the crypto industry’s bitterness toward Gensler’s tenure at the SEC. The $1.7 trillion industry largely sees itself as the vanguard of a revolutionary new digital financial system, which requires new regulations. Gensler, who has chaired the SEC since 2021, has aggressively applied existing law to the cryptocurrency industry.

During this election cycle, the industry has spent hundreds of millions of dollars trying to elect candidates who adopt their views rather than those of Gensler. And it’s not just Republicans like Trump: Mark Cuban, the billionaire ‘Shark Tank’ host who has become a prominent surrogate for Vice President Kamala Harris, has been one of Gensler’s harshest critics, telling Politico earlier this month that he’s doing his job “poorly” and “pushing the crypto industry overseas.” 

Gensler, who previously taught a course on cryptocurrency technology at MIT, sees something completely different in crypto: trillions of dollars of unregulated securities preying on consumers subject to existing investment laws. He made his views plain during a speech last week where he said the industry is “rife with fraud, scams, bankruptcies and money laundering.”

So far, he and other skeptics seem to have been proven correct.

In February 2022, the agency accused cryptocurrency lender BlockFi of acting as an unregistered bank, and the company paid $100 million to settle the charges. Five months later, Celsius, a competitor offering similar services, collapsed, leaving a billion-dollar hole in investor’s pockets. That fall, FTX, the largest crypto exchange once valued at over $30 billion, went bankrupt after widespread fraud at the organization. 

FTX founder Sam Bankman-Fried contributed more than $40 million to candidates in the 2022 midterm elections, primarily to Democrats, and he’s said he was also a top contributor to Republicans during that cycle due to the use of dark money; Bankman-Fried is now serving 25 years in prison. 

In the aftermath, the agency sued Coinbase, a San Francisco-based competitor to FTX, arguing the company was an unregistered securities exchange selling unregistered securities. Shortly after, the agency sued crypto heavyweight Binance for running an unregulated security exchange, as well as a host of charges echoing the fraud that ultimately brought down FTX. 

Both cases are currently pending, with Binance already paying over $4 billion and executives pleading guilty to a host of charges related to money laundering.

In 2023, the SEC used existing securities laws to charge stablecoin operator Tera with fraud after the company’s collapse. The details are laughably complex; basically, the company claimed it had a bunch of sophisticated technology managing the cryptocurrency, but the truth was a lot simpler; according to the SEC, payments were actually “made through traditional means.” During the downfall, the CEO attempted to flee before ultimately being arrested in Montenegro. Investors lost over $40 billion.

After numerous cases of fraud and the collapse of FTX, the industry has accused Gensler of a lack of clarity around enforcement actions. Gensler responds that existing security law is more than capable of regulating the industry. Crypto executives and the people they pay argue that digital assets are different from traditional stocks and bonds. 

In May, the House of Representatives passed legislation in line with the industry’s vision. The bill creates a new regulatory regime for “digital-asset” companies and shifts enforcement responsibility from the SEC to the Commodity Futures Trading Commission. The vote passed 239-136, with the support of over 70 Democrats. Observers believe, as-is, the bill may struggle to achieve 50 votes in the Senate next session.

The industry is spending serious money to shift that calculus. In the Ohio U.S. Senate race, various super PACS have spent over $40 million backing Republican Bernie Moreno, a former car salesman turned crypto supporter.  Moreno is facing three-term Sen. Sherrod Brown, an outspoken crypto critic, in a race that could determine control of the chamber; it’s likely to end up as the most expensive U.S. Senate race in history. 

Fairshake, the most prominent crypto super PAC, has spent more than $40 million this year in federal elections, including more than $10 million against Rep. Katie Porter during her losing primary campaign for U.S. Senate in California. Porter is a close ally of Sen. Elizabeth Warren, the most prominent crypto critic in Congress. And although Tesla CEO Elon Musk has been Trump’s biggest booster, and Cuban is perhaps one of Harris’ most prominent surrogates, they’ve both endorsed a longshot Republican bid to defeat Warren this year in deep-blue Massachusetts. 

As for Trump’s World Liberty Financial token, it was a massive flop. Two weeks after launch, it filed a report earlier this week slashing its fundraising goal from $300 million to $30 million; that report was filed with the SEC.