The Commissioner of the US Securities and Exchange Commission (SEC), Caroline Crenshaw, has criticized that the recent decisions of the agency to drop multiple crypto-related matters, making the relocation unprecedented and rejecting for long-term legal principles.
The Commissioner has also set the Division of the Corporation Finance for its position that Memecoins will not be eligible as effects according to federal legislation, with the argument that this function has no legal basis and clarity.
SECs retreat of crypto enforcement
In the past week, the SEC has dropped several lawsuits against large crypto companies, including Coinbase, Robinhood and Gemini. This shift follows the formation of a specialized crypto task force aimed at developing future regulations.
Although the SEC attributes these dismissals to current legal considerations, Crenshaw argues that enforcement should not be left while new policy is still being developed.
She wrote:
“If the committee adopts new regulations or the congress, we can detect a different path. But until that time we have a framework and that framework must be applied and maintained as much as all participants. “
The Commissioner argued that the courts consistently confirmed the authority of the SEC on Crypto, with reference to the example of the now-defired Coinbase right case. In that lawsuit, Crenshaw argued that the agency had already established a strong legal case, in which the court agreed that the committee argued sufficient violations of the securities laws. “
In the meantime, the Commissioner wondered whether these decisions weaken the assets of the SEC to combat fraud, including ponzi schemes, and whether digital assets are now being given preferential treatment over traditional financial instruments.
She also warned that selective enforcement could excel confidence in the SEC and fuel perceptions of political bias. She concluded:
“The task of our agency is to do what is good for investors, issues and capital markets. This is not. “
The debate about memecoins
Crenshaw also criticized the recent guidelines of the SEC on memecoins, with the argument that it presents an incomplete and legally non -supported image.
She doubted the lack of a clear definition for memecoins and noted that the guidance describes them loosely as speculative assets that are influenced by online trends. However, they pointed out that these characteristics apply widely to most digital assets, making the distinction unclear.
She asked herself:
“And what exactly is a meme coin, the category on which this guidance is aimed? Contrary to how a promoter chooses to label it, what basis do we have to determine whether something is a meme coin? “
She further argued that labeling a token like a memecoin does not exempt this from securities laws. The Howey test, which determines whether an active is eligible as a safety, focuses on the economic reality of an offer rather than on its branding. [Editor’s Note: It is also based on the sale of Floridian orange groves in 1934, almost 100 years ago. It was designed for real estate, leaseback agreements, and agricultural investments, not blockchain-based digital assets.] Crenshaw warned that promoters could use the lack of definition to circumvent the regulations.
Another important problem, Crenshaw noticed, is the assumption that memecoin prices exercise independently of management efforts.
She argued that project teams often influence market conditions through delivery manipulation, return and strategic marketing campaigns. Fraudulent diagrams such as pump and dumps and carpet trekkings continue to rule in the sector and emphasize the need for strong supervision.
Crenshaw ended with her comments and stated that the current approach of the SEC does little to protect investors or to maintain the integrity of financial markets. Instead, the ambiguity and weakens the enforcement efforts, so that space is left for gaps from the regulatory actors who can exploit bad actors.
She wrote:
“This guidance is not a motivated interpretation of existing legislation. It raises more questions than it answers about what a meme coin is and whether that is a defined or useful categorization for existing securities laws. “