Robinhood’s Strong Response: Exposing the SEC’s ‘Confused’ Approach to Cryptocurrency
Date: 2024-09-19 Author: Gabriel Deangelo Categories: BUSINESS
In testimony before the House Financial Services Committee’s Subcommittee on Digital Assets, Daniel M. Gallagher, Robinhood’s general counsel and a former SEC commissioner, criticized the agency’s approach to regulating cryptocurrencies.
Gallagher accused the SEC of mishandling its regulatory responsibilities, particularly with regard to digital assets, and highlighted how Robinhood’s efforts to comply have been met with silence and threats of enforcement action.
Robinhood’s Repeated Attempts to Get Clarity: The SEC Has Been ‘Mostly Unresponsive’
According to Gallagher, Robinhood has had more than a dozen meetings and calls with the SEC over 18 months. The goal was simple: clarify how to register their cryptocurrency offerings under SEC guidelines.
Despite these efforts, however, the SEC remained largely unresponsive, providing little information that could have helped Robinhood understand how to proceed.
This period of uncertainty culminated with the SEC issuing a Wells Notice to Robinhood, signaling possible enforcement action.
Gallagher noted that the Wells Notice was a major blow to Robinhood, given the company’s repeated attempts to engage with the SEC in good faith.
Rather than provide guidance, the SEC chose the route of threatening litigation, leaving Robinhood and many other crypto companies in a state of fear of future lawsuits rather than confidence in clear regulation.
Fox News journalist Eleanor Terrett tweeted Gallagher’s remarks, highlighting the frustration many in the industry have with the SEC’s approach to crypto regulation.
Gallagher noted the irony of the SEC’s approach, explaining that instead of promoting innovation and protecting consumers, the agency’s tactics are pushing blockchain projects outside the U.S.
He emphasized that Robinhood has always operated within a regulated framework and has provided its cryptocurrency services in more than 50 U.S. states.
However, the lack of a clear, temporary regulatory framework for digital assets is forcing companies to seek clarity overseas, where they can operate without the constant fear of enforcement action.
Direct Criticism of the SEC’s Enforcement Approach
In his speech, Gallagher directly criticized the SEC’s approach, which he said is doing more harm than good to both consumers and blockchain innovators.
He explained that the SEC’s focus on enforcement rather than rule-making is stifling innovation in the U.S. digital industry.
Without clear guidelines, companies like Robinhood are left guessing about what could lead to enforcement action, which prevents them from developing new products and services for the market.
Gallagher also pointed to the upcoming 2024 U.S. elections. He noted that digital assets have become a major topic of discussion, with over 50 million Americans investing in Web3.
He warned that the SEC’s current stance could have significant implications for the industry and American consumers, especially if regulatory clarity continues to lag innovation.
Despite these challenges, Gallagher expressed hope that Congress can step in and establish a clear regulatory framework for the crypto industry.
He emphasized that the SEC already has authority under Section 36 of the Securities Act to create a temporary digital asset regulatory regime, but the agency is choosing not to do so.
Instead, the SEC continues to pursue an enforcement-based approach, which Gallagher says only further confuses market participants and stifles innovation.
