Serious Question: What Will Be the Legacy of SEC Chair Gensler?

The SEC has a string of decisive losses where judges are ruling 3-0 against the Commission.

We are only now grasping the consequences.?

1) Death of Chevron Doctrine: Under Chair Gensler's watch, the SEC's string of losses has diluted the deference usually afforded to the agency's interpretations of ambiguous laws.?

The doctrine's erosion suggests that future SEC actions will face higher judicial scrutiny.?

2) Shift Toward Congressional Authority: As the SEC loses decisively in multiple districts, courts increasingly look to Congress for definitive guidance on ambiguous matters. This redirects the source of financial regulation authority from the SEC to Congress. (The “Major Questions” Doctrine in ascent.)?

3) Redefining Investment and Commodities: Legal precedent is evolving. One court's ruling that 'speculation' doesn't qualify as an investment if it lacks common enterprise undermines traditional securities definitions. Combine that with the Ripple ruling (the manner of sale matters in determining whether something is a security) and you have a stronger CFTC and a proliferation of Digital Asset commodities.?

4) Questioning Regulation by Enforcement: Courts have deemed the SEC's approach to regulation via enforcement as ‘capricious and arbitrary’. Future SEC Chairs are likely to abandon that unsuccessful strategy.?

5) Increased Litigation: With the SEC's interpretive guidance holding less weight, we could see a surge in litigation as market participants challenge the agency's authority more aggressively.?

6) Legitimacy Questions for Previous Cases: If the recent court losses call into question the SEC's interpretive authority, there may be grounds to reexamine past enforcement actions, leading to potential appeals or even reversals.?

The sum total of these consequences points to a future where both the SEC and the financial markets it regulates navigate a landscape of greater complexity and uncertainty.?

The legacy of SEC Chair Gensler, thus, risks being one that complicates rather than clarifies the rules of the game.?

The Chair’s strategies have inadvertently weakened the SEC's legal and enforcement frameworks.?

In retrospect, the Chair could have approached Digital Assets differently.

Last year, former SEC Chair Arthur Levitt and I wrote an Op-Ed in the WSJ.

We advised that the SEC issue Interpretive Guidance, respond to requests for rule-making, and work out a legal framework with Congress.?

The damage to public confidence, enforcement bite, and the SEC’s reputation as an institution appears significant.?

It turns out longest serving bipartisan SEC Chair Arthur Levitt was correct: "‘Crypto will be part of the American financial scene sooner than later.’"

Chair Gensler understood TradFi and Crypto.?

In an alternate universe, Chair Gensler could have led the transformation from the old conflict-ridden centralized world to the new all-to-all decentralized world.?

Chair Gensler could have bridged the gap, advanced a framework, and gone down as a legend.?

Now, it seems that a new SEC Chair and Congressional action seems inevitable to repair the damage.

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