At the Bitcoin 2024 conference in July, Donald Trump stated that, if he were elected president, he’d fire SEC Chair Gary Gensler “on day one.” The announcement was met with loud applause.
Gensler has cracked down hard on the crypto industry during his term as chair, suing such major players as Coinbase, Cumberland DRW, and Kraken, and going after fraudsters like Sam Bankman-Fried and Do Kwon. In a 2023 speech, he called the crypto field “rife with fraud, scams, bankruptcies, and money laundering.”
The price of bitcoin skyrocketed to a record high of more than $93,000 following the election. Advocates anticipate a more crypto-friendly SEC under Trump.
But, technically, Gensler’s term as chair lasts until 2026. What’s likely to happen to Gensler’s job between now and then?
You can’t fire him—he quits! Traditionally, SEC chairs step down when a different president from the one who appointed them comes to power. Though they’re not required to do so, there are good reasons for this norm, Hadas Jacobi, an attorney specializing in digital assets and regulation at Reed Smith LLP, told CFO Brew.
“No one wants to work in an environment that’s adversarial to them,” she said, noting that it likely wouldn’t be in Gensler’s “best interest, or the interest of the SEC or the US as a whole” to go against “a tradition of peacefully and cooperatively stepping aside” to let the new administration focus on its priorities.
And Gensler’s hinted that he will resign as chair. Earlier this month, he gave a speech at the Practising Law Institute that sounded kinda like a swan song, making reference to his parents and three daughters, giving a retrospective of his career highlights, and concluding with the statement, “I’ve been proud to serve with my colleagues at the SEC, who, day in and day out, work to protect American families on the highways of finance.”
Giving Gensler the pink slip: If Gensler does opt to stay on past January, there are a few ways Trump could oust him—but none will be as easy as giving an Apprentice contestant the ax.
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Technically, Trump could demote Gensler from chair to commissioner, Amanda Rose, a professor of law and management at Vanderbilt University who specializes in securities law, told CFO Brew.
“It is the president’s prerogative who is the chairperson of the SEC, and it’s my understanding that the president could demote the chairperson to being a commissioner at their discretion,” Rose said.
Trump could fire Gensler from the SEC for cause, such as for “malfeasance or inefficiency or neglect of duty,” Rose said. But this would start a lengthy legal battle, and one that the president would risk losing. The court proceedings might “outlast a commissioner’s five-year term,” law professor Tonya Evans wrote in Fortune.
And theoretically, Trump could even fire Gensler without cause, Rose said. The legal language around firing SEC personnel is unclear, she noted. “It’s not in a statute like it is for some other agencies,” she said. Again, though, this approach would be “subject to some potential legal dispute.”
A more crypto-friendly SEC? Rose sees the SEC taking a less aggressive stance toward crypto if Gensler leaves. Under Gensler, the agency tends to view almost all digital currencies except bitcoin as securities rather than commodities, she said.
“That approach has been heavily criticized, and I think the SEC will retreat from that,” she said.
Gensler’s tenure has been marked by “what’s sometimes referred to as regulation by enforcement,” Rose said. But the crypto industry would prefer regulation by, well, regulation. The SEC, the CFTC, and other agencies at the federal and state levels have “overlapping claims of jurisdiction,” Jacobi said, and crypto advocates would like to see a framework that would let them know “which digital assets fall within the purview of which agency.”
After Gensler departs—one way or another—they may make more progress on that front.