Robinhood Chief Legal Officer Daniel Gallagher criticized the U.S. Securities and Exchange Commission’s (SEC) approach to crypto regulation in written testimony submitted for a September 18 hearing before the House Financial Services Subcommittee on Digital Assets.
Gallagher described Robinhood’s efforts to comply with SEC regulations, citing more than a dozen meetings and phone calls over 18 months. However, despite these efforts, the company received a notice from Wells of the SEC’s Enforcement Division in May.
He pointed out that SEC staff often did not respond to Robinhood’s requests for guidance on how to proceed with the registration proposal.
‘Scorched earth approach’
Gallagher labeled the SEC’s strategy as a “scorched earth” approach that negatively impacts U.S. crypto investors.
He argued that the lack of clear guidance on which digital asset transactions qualify as investment contracts remains a fundamental problem. This uncertainty has led to multiple SEC lawsuits against crypto companies, further hindering the industry’s progress.
Gallagher added that “regulation by enforcement” is hurting American consumers looking for greater access to digital assets. It also stifles blockchain innovation and erodes the US competitive advantage in global digital asset markets.
He contrasted the US with Europe, where the Markets in Crypto-Assets (MiCA) regulations provide a unified framework for crypto markets, allowing innovation to flourish abroad.
Next steps for SEC
Gallagher suggested that the SEC could use its existing authority under Section 36 of the Securities Exchange Act of 1934 to create a framework for registering and overseeing platforms that trade in digital assets considered investment contracts , facilitate.
He noted that these regulations could address important issues such as registration, consumer protection, retentions and transaction reporting. These measures, he added, could have mitigated some of the damage caused by the 2022 FTX collapse.
Roles in Congress
Gallagher emphasized the need for Congress to establish a clear, comprehensive regulatory framework for digital assets.
He argued that only Congress can provide the long-term regulatory clarity needed to ensure that token issuers, exchanges and other market participants can operate without fear of continued enforcement action.
Such clarity, according to Gallagher, is crucial to maintaining US leadership in responsible blockchain innovation and well-regulated digital asset markets.