Recently, Chairman Gensler underwent an inquiry from a diverse group of Congress members, with Democrat Ritchie Torres from The Bronx engaging in a captivating five-minute exchange. Torres aimed to clarify the exact definition of an investment contract, a crucial factor in the SEC’s jurisdiction.
During this exchange, he questioned whether an investment contract requires a tangible agreement, emphasizing the SEC vs. Howey case, which involved two explicit contracts. Torres’s line of inquiry echoes concerns among cryptocurrency advocates.
They fear that the term “investment contract” has been broadly interpreted, potentially allowing Gensler to classify anything as a security. Torres expressed his apprehension, noting;
“I worry that when it comes to crypto, your interpretation of the term ‘investment contract’ has no limiting principle and therefore is susceptible to arbitrary and capricious enforcement actions,”
However, Chairman Gensler did not provide a clear response to Torres’s query about whether an investment contract necessitates a tangible contractual arrangement to be considered a security.
This prerequisite could protect digital collectibles and other tokens from investment contract categorization, while Gensler argued that current legal statutes give the agency extensive discretionary power.
Nonetheless, he couldn’t cite any instances where an investment contract existed without a concrete agreement. In response, Torres pointedly remarked,
“I find it telling that you can’t cite a single case,”
Crypto’s Rising Influence in Washington D.C.
In many respects, Torres’s stance on this matter highlights a growing divide between the executive branch and Congress regarding cryptocurrencies. While the SEC is actively pursuing legal actions against Binance and Coinbase, Congress is increasingly adopting a more pro-crypto stance.
Elected officials on Capitol Hill, representing both Democratic and Republican camps, are pushing back against Gensler and embracing crypto-friendly positions. Figures like Patrick McHenry and Majority Whip Tom Emmer are noteworthy in this context.
In their endeavors, Coinbase actively seeks support from influential House members, including Maxine Waters, the ranking member of the House Financial Services Committee, as reported by sources familiar with the firm’s Washington, D.C. activities. Torres’s opposition to Gensler’s approach mirrors Coinbase’s increasing influence among House Democrats.
“While the Senate remains less receptive,” noted an insider regarding lobbying efforts, “a positive trend is emerging.” The company is focusing significant attention on Ohio to gain Senator Sherrod Brown’s endorsement, as he chairs the Senate Financial Services and Housing Committee.
Waters and Brown will have vital roles in advancing legislation for stablecoins and cryptocurrencies. Coinbase isn’t alone in these efforts; the Blockchain Association, Ryan Selkis, and a16z also offer their support.
Simultaneously, cryptocurrency community members actively engage in Washington, D.C.’s political sphere. Prominent figures, including Mike Novogratz of Galaxy Digital and venture investor Travis Scher, have recently wielded influence in the nation’s capital.