The cryptocurrency industry is closely watching the upcoming U.S. presidential election, hoping for a leader who might adopt a more lenient approach towards regulatory enforcement. With ongoing conflicts with the U.S. Securities and Exchange Commission (SEC), the industry’s eyes are on former President Donald Trump.
Donald Trump has recently shown a warmer stance towards the $2.5 trillion crypto market. Notably, he is set to host a Bitcoin-focused fundraiser on July 27, signaling his newfound support. Despite his past criticisms of cryptocurrencies during his presidency, Trump’s recent rhetoric has been more favorable. Legal experts believe that a Trump victory could result in a significant shift in the SEC’s approach to crypto regulation.
“A Trump administration would likely seek to reset and rethink the SEC’s crypto regulatory policy,” said Michael Selig, partner at Willkie Farr & Gallagher LLP. “Such a reset would naturally involve resolving ongoing enforcement actions and investigations brought by the prior administration.”
During President Joe Biden’s tenure, the SEC has intensified its scrutiny of the cryptocurrency sector, particularly after the 2022 collapse of crypto exchange FTX. The agency has launched numerous enforcement actions, often accusing exchanges and broker-dealers of failing to register under securities laws.
SEC Chair Gary Gensler has consistently argued that most cryptocurrencies qualify as securities and should register with the SEC. However, many crypto companies contest this classification, either claiming their tokens are not securities or criticizing the registration requirements as ambiguous.
While the SEC has settled several cases, significant litigation remains unresolved, involving prominent firms like Kraken, Coinbase, and Binance. Some investigations, such as those into Ethereum and BUSD, a Binance-branded cryptocurrency issued by Paxos, have concluded.
The ongoing disputes have left the question of whether tokens are securities unresolved. The SEC’s lawsuit against Ripple Labs Inc. and its executives is a notable case that could provide clarity. The SEC accused Ripple of conducting an unregistered securities offering through XRP token sales, raising over $1.3 billion. A federal judge ruled last July that XRP sales to retail investors on exchanges did not constitute investment contracts, a decision viewed as a setback for the SEC.
Ripple CEO Brad Garlinghouse recently predicted a resolution “very soon” in an interview with Bloomberg Television.
The SEC initiated the lawsuit against Ripple in 2020, during Trump’s presidency. Although Trump has not detailed his views on crypto regulation, industry lawyers and executives anticipate a reduction in enforcement activity if he returns to office.
“Remember, if Trump gets elected, the Republicans can immediately change who the chair is,” said Austin Campbell, a blockchain consultant and adjunct professor at Columbia Business School. “What this means in practical terms is that many of these cases – which have been shotgunned out at highly variable degrees of quality and generating highly variable decisions that are increasing confusion – could all be settled instead of having to go forward.”
However, not all industry voices are convinced that a change in administration would lead to a dramatic shift. Emily Meyers, general counsel at venture capital firm Electric Capital, noted that securities enforcement cases are typically “apolitical” with minimal staff turnover following political changes. “It’s unlikely that any ongoing cases get dropped, especially those that are already being argued in federal court,” she said.
As the presidential race heats up, the cryptocurrency industry remains hopeful that a Trump victory could usher in a more favorable regulatory environment, potentially easing the intense scrutiny it currently faces from the SEC.
