A wave of senior enforcement lawyers at the U.S. Securities and Exchange Commission (SEC) is preparing to leave their roles, raising concerns about the agency’s ability to navigate the complex regulatory landscape of the cryptocurrency market.
A Fox Business journalist, Charles Gasparino, recently tweeted that SEC officials from major law firms have seen several resumes from senior enforcement lawyers in the crypto assets and cyber unit.
“The moves suggest that the bleed of senior staff under Gary Gensler’s controversial leadership of the agency isn’t letting up,” wrote Gasparino, without disclosing sources.
The pundit’s revelation has caused a stir, with experts arguing that the potential exodus of these experienced legal minds could significantly diminish the agency’s effectiveness in regulating the rapidly evolving crypto space.
Notably, the discontent among SEC staff appears to be fueled by ongoing disagreements regarding SEC Chair Gary Gensler’s approach towards cryptocurrencies. Gensler’s inclination towards tighter regulations on the sector has drawn criticism and fueled calls for his resignation from industry insiders who view it as an overreach impeding innovation.
The SEC’s efforts to strengthen its crypto assets and cyber division are reflected in a proposed record budget of $2.4 billion to add 170 staff positions, demonstrating a commitment to tightening oversight within the crypto space. However, the potential loss of experienced legal experts could undermine this commitment and create political uncertainty.
Industry experts have been vocal about the impending exits. Pro-Ripple lawyer John Deaton emphasized the importance of maintaining a faithful allegiance to the law, suggesting that departing SEC lawyers may have ethical concerns about the agency’s direction.
“I can say with certainty there will be no job offer coming from the Deaton Law Firm, despite the fact that I’m hiring. You see, unfortunately for SEC enforcement lawyers, the Deaton Law Firm requires one to always maintain a faithful allegiance to the law, plus we have a zero-tolerance policy for intentionally lying to judges just to win a motion,” wrote Deaton.
On the other hand, Stuart Alderoty, Ripple’s Chief Legal Officer, questioned whether departing lawyers would be willing to raise concerns about Gensler’s leadership with oversight bodies, hinting at potential internal tensions within the SEC.
These comments come amidst the SEC’s high-profile legal battle with Ripple over the classification of XRP as a security. Despite Ripple’s recent legal victories, including a significant ruling from Judge Analisa Torres declaring XRP not a security last July, the SEC has demonstrated a readiness to continue the legal fight through appeals. Industry experts are however optimistic there will be a settlement, with legal experts James Murphy “MetaLawman” suggesting external factors like the upcoming election year and potential leadership changes at the SEC could influence a settlement.