SEC Urged to Abandon Crypto ‘Crusade’ by Congressman Torres After Ripple Legal Battle

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Ruholamin Haqshanas

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Ruholamin Haqshanas

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Ruholamin Haqshanas is a contributing crypto writer for CryptoNews. He is a crypto and finance journalist with over four years of experience. Ruholamin has been featured in several high-profile crypto...

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July 19, 2023

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Congressman Ritchie Torres has asked the US Securities and Exchange Commission to provide clear rules for crypto instead of “indiscriminately” treating the majority of crypto assets as securities under its purview. 

On Tuesday, Torres penned an open letter to SEC Chairman Gary Gensler, expressing his discontent with the agency’s failure to issue clear guidance to the cryptocurrency industry.

“Under Chair Gensler, the SEC has not issued a single rule on crypto assets, nor has it given any clear guidance,” said Torres. 

“All it has done is sent mixed messages, one after the [other], not only contradicting the CFTC but often contradicting itself.”

The letter came after the judge presiding over the SEC v. Ripple Labs case delivered a summary judgment ruling that XRP is not a security in regard to programmatic sales on digital asset exchanges.

Torres applauded the ruling, asserting that the SEC’s enforcement strategy, commonly known as “regulation by enforcement,” suffered a significant blow in court.

While the district court ruling is not binding outside its jurisdiction and could still be appealed, it sets a precedent challenging the SEC’s assertion that most digital assets are securities that should be registered.

“Judge Torres has made it crystal clear to the SEC that digital assets are not securities in the abstract and that it lacks the legal authority to regulate digital assets untethered from an actual security offering,” the congressman wrote.

Torres’s letter also highlighted the judge’s criticism of the SEC for failing to provide fair notice to the industry regarding the classification of digital assets as securities. 

He noted that under Gensler’s leadership, the SEC has not issued any rules or clear guidance on the regulation of crypto assets.

SEC Leads Government’s Crackdown on Crypto

The SEC has been at the forefront of the US government’s efforts to clamp down on the cryptocurrency industry.

Last month, the SEC sued both Binance, the world’s largest cryptocurrency exchange, and Coinbase, the largest US-based cryptocurrency exchange. 

The commission has also taken enforcement action against crypto exchanges Kraken and Bittrex, as well as crypto lending platform Nexo so far this year. 

However, Torres’s letter adds to the growing disapproval of the agency’s actions.

This critique follows an equally scathing assessment from Inspector General Deborah Jeffrey and Comptroller General Gene Dodaro, who called for an investigation into the SEC’s “unusual” approval of the crypto broker-dealer “Prometheum.” 

Torres denounced the approval as a mere act of propaganda, designed to create the illusion of regulatory clarity while leaving other firms with no clear path to registration.

Nevertheless, it remains to be seen how the SEC responds to the recent court ruling. 

Speaking at an event hosted by the National Press Club in Washington DC on Monday, Gensler said that although he is “pleased” that the court ruling protects institutional investors by pushing back at the so-called fair notice argument in the Ripple case, he is disappointed on behalf of retail investors.

“While disappointed on what they said about retail investors, we’re still looking at it and assessing that opinion,” Gensler, who has led an aggressive crackdown on the crypto sector during his time as SEC chair, said.