Footage has emerged where the Securities and Exchange Commission Chairman Gensler told a group of institutional investors in 2018 that four cryptocurrencies are not securities, and that 75% of the whole crypto market at the time was outside that legal category.

The video is from a crypto-focused institutional investor event by Bloomberg and Fidelity in 2018, showing Gensler saying things which contradict his more recent claims that all cryptocurrencies besides Bitcoin are securities.

“Over 70% of the crypto market is Bitcoin, Ethereum, Litecoin, Bitcoin Cash. Why did I name those four? They’re not securities,” Gensler tells the audience. “Three quarters of this [digital asset] market are not securities.”

The remarks came at a time when Bitcoin was in a bull market, and before Gensler’s time as SEC chair by just over two years. At the time, Gensler was a senior MIT lecturer and former chair of the Commodities Futures Trading Commission (CFTC).

Gensler’s comments about the four cryptocurrencies not being securities were part of a broader speech describing market dynamics which gave rise to so-called blockchain projects – largely built on Ethereum – many of which turned out to be scams.

At the Bloomberg event, the SEC chairman was providing guidance to hedge funds and other investors regarding the legal status of the cryptocurrency market. Various videos have surfaced from Gensler’s lecturing days showing him stating that Litecoin is not a security.

The now-SEC chair was introduced as ‘my friend Gary Gensler’ by Mike Novogratz, a hedge fund billionaire who runs a crypto fund Galaxy digital. The billionaire had persuaded CNBC to replace the Litecoin ticker with Solana prior to FTX’s collapse. Solana is a company which marketed itself as a decentralised crypto when it never was. It was backed by fraudster Sam Bankman Fried.

One lawyer, Preston Byrne has noted that Gensler’s 2018 comments came when he did not occupy the SEC legal position. However, the precedent would certainly be worrying, as that would mean that fundamental legal concepts are highly malleable and open to interpretation, depending on where one stands.

At the moment, the cryptocurrency space is rife with anger due to Gary Gensler’s failure to provide guidance about the legal status of cryptocurrencies and tokens, in what many have called “regulation by enforcement strategy”.

The SEC has also been in hot water over its persistent refusal to allow a SPOT Bitcoin ETF, while allowing Futures ETFs all the while claiming that it’s actions are ‘investor protections’.

Is Gensler gaslighting markets?

In an April 18, 2023 hearing regarding oversight of the SEC, when pressed to give a definitive answer on whether Ether qualified as a security under the SEC’s purview, Gensler did not include specifics.

“Clearly an asset cannot be both a commodity and a security,” said McHenry. “I’m asking you, sitting in your chair now, to make an assessment under the laws as exist, is Ether a commodity or a security?”

While Gensler refused to state whether Ethereum is or isn’t a security, the SEC has remained mute on the other non-Bitcoin currencies mentioned in Bloomberg’s 2018 address. There is no mention of Litecoin, an early decentralised competitor to Bitcoin since 2011 which remains highly popular, or Bitcoin Cash, the so-called fork of the original cryptocurrency which has since faded down the ranks.

The general sense of anger isn’t so much directed at the prospective ruling as it is towards the regulatory confusion, muddied waters, and seemingly deliberate obfuscation of properly categorising assets in the space – fraud and all – while at the same time preaching a tune of regulatory compliance.

Some have speculated that Ethereum’s reckoning will come once the legal groundwork against smaller projects is created.

Regulatory Action

Just last week, the SEC took aim at Binance and Coinbase for violating securities laws, though emergency regulatory moves against Binance were more dramatic. For the first time, the agency designated 13 cryptocurrencies as securities in its legal complaints, including large projects like Solana, Cardano, and Polygon. A longer list of projects the SEC views as securities emerged on June 10.

On June 12, US lawmaker and representative, Warren Davidson introduced the “SEC Stabilization Act” into the House of Representatives. One of the bill’s main provisions is to fire Securities and Exchange Commission (SEC) Chair Gary Gensler.

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