The last half of the month, in particular, was a parade of horribles for Gensler, full of stinging defeats on crypto policy — where Gensler’s aggressive crackdown has operated as a de facto ban on the industry. But Gensler not only found himself alone on a shrinking island with crypto: Bipartisan criticism of Gensler’s agenda is mounting, and rightly so.
Gensler’s crypto-policy losses perhaps signal a sea change in the Biden administration’s view of the industry. But even if they don’t amount to vote of no confidence in Gensler, it’s clear that the Democratic Party is not united behind Gensler’s regulatory worldview.
Take, for example, Congress’s vote on a resolution of disapproval of the SEC’s Staff Accounting Bulletin 121. SAB 121, which provided guidance to crypto custodians requiring them to list custodied assets on their own balance sheets, was issued in March 2022. Over a year later, in October 2023, the Government Accountability Office determined that the guidance should have been submitted to Congress under the Congressional Review Act (CRA).
When the House considered a CRA resolution of disapproval on May 8, the White House issued a statement supporting SAB 121 and promising to veto the resolution. The House then passed the resolution with limited bipartisan support. At this point, Gensler may not have been complaining about his missing cereal-box prize, but his month was about to get worse.
A week later, in the face of the president’s threatened veto, the Senate passed the disapproval resolution with strong bipartisan support (60–38), including from Senate Majority Leader Chuck Schumer.
Perhaps even more consequentially, Gensler’s entire crypto regulatory philosophy — that the crypto industry doesn’t need new rules because it doesn’t play by existing rules — was dealt a serious blow on May 22 when the House passed the Financial Innovation and Technology for the 21st Century Act (FIT 21), a bill that would divide regulatory authority between the SEC and Commodity Futures Trading Commission. The vote was 279–136, with 71 Democrats voting in favor of the bill, including former speaker of the House Nancy Pelosi and current Democratic whip Katherine Clark.
Gensler’s opposition to FIT 21 was no secret. In an unusual move, he released a statement criticizing the bill in detail and arguing against its passage. The White House, however, undercut Gensler’s core premise that new legislation is unnecessary by releasing a statement opposing FIT 21, but expressing eagerness for “continued collaboration with Congress on developing legislation for digital assets.” That sounds a lot like getting soap in your eyes.
On May 23, the SEC approved exchange rule changes paving the way for spot Ether ETFs. This happened fewer than six months after Gensler’s SEC was dragged kicking and screaming to approve spot Bitcoin ETFs. While the SEC has not yet approved the ETFs themselves, it’s an indication that the SEC may finally be willing to concede that Ether itself is not a security, a position that Gensler has gone out of his way to avoid taking (and the agency has separately been investigating). Feels like not getting the window seat.