The Shocking Truth About the SEC's Crypto Dealer Rule Loss & Gary Gensler's Resignation!
22:52 Share

My dad works in B2B mar keting. He came by my school for career day and said he was a big row as man. Then he told everyone how much love calculating his return on ad spend. My friends still laugh at me. To this day.

not everyone gets B2Be, but with linked in, you'll be able to reach people who do get a hundred dollar credit on your next ad campaign. Go to linton dom slash results to claim your credit. That's linton slash result.

Terms and conditions apply linked in the place to be, to be the sun shining, birds are singing and all feels right in the world until the season changes and suddenly you lose your motivation to get out of bed. In fact, one in five people experience some form of deter. And syria s fine. Our vision, mentally healthy nation for all, because we want you to live your best life and be your best you all year around. Please visit meddle healthy nation dot org to learn more.

The encrypted freedom liance of texas in federal court that basically said, no, we think this room is an unlawful expansion of the S, C, C, S powers under the exchange act because the S, C, C can only do what congress allows IT to under the boundaries set, you know, by status.

This content is brought to you by beaching, which is a leading enterprise grade layer one public blockchain spearheading a digital revolution from a sustainable, highly scalable smart contract platform. The veteran blockchain has many unique features, which makes IT an ideal choice for web three applications. V chain is working with many great enterprises such as P W, C G, B N, G B M W and walmart china.

Most recently, they partner with the boston consulting group to build a revolutionary, decentralized placation ecosystem. I'm a big believer in this project. I happened since twenty eighteen.

I've been a vet token holder for years. And this block chain is highly scalable, uh, great with security and speed and IT has a low energy consumption. If you d like to learn more about v chain, please visit v chain dot org. Link will be in the description. Welcome into the thinking cypher podcast on your host, tony and ward in my guest today is law Sanders, whose policy council at the blockchain association Laura, good to see you.

Happy friday. Thank you so much having me as always .

a Laura big news yesterday. Uh, big win for decypher to industry and of course the blockchain association. Uh the dealer rule.

Uh, this was struck down by the court. But let's at the table tell us about this deal rule and what the S C, C. Was trying to do here.

Yeah absolutely. Um so the dealer role is a role that was promoted ted by the S C C. Under the exchange jack um and what the rule attempted to do was brought in the definition of who a dealer is under that statue.

And we brought a lawsuit along side um the encrypted freed alliance of texas in federal court that basically said, no, we think this room is an unlawful ful expansion of the S C S powers under the exchange act because the S C D can only do what congress allows IT to under the boundaries set you know by statue and we thought that this role went out outside those boundaries and we also brought claims that um the process that um the S C C followed to promote ate the role was arbitrary and a precious under the administrative procedure act um and really our fundamental issues with the rule were that you know there is sort of two categories of understanding that are relevant for like a legal proceeding like this and one of them is just the statuary tax. So the exchange act defines who is a dealer um and who is a traitor. They set up definitions in the statue contest definitions, and the S, C, C can use these definitions.

Rules do all of the regulatory things that is a needs to do to phil, you know, is Mandy. Our issue was that, you know, the rule set up here was so far outside of the statutory definition that IT really kind of created a whole new category people that the S. C, C.

Was going to have jurisdiction over. And that's just not permission under the law. And the second sort of category of references that is important for sort of a long suit like this is just historical references. You know what historical do people understand a dealer to be um IT was our position in the court agreed that a dealer is somebody who buys themselves securities as part of a regular business.

And then as a part of a regular business has to have some sort of meaning, not just, you know, as the S C C here tried to sort of explode that portion of the definition and created so that anytime a uh percent buying a song securities had the effect of a providing liquidity to the market, you were the fact to a dealer, you know IT was our position that historically, you would really need to have customers need to be providing a service to investors in order to be a dealer. And there are a lot of reasons for that, that are super you know boring and legal. And people can read the are filings that they're interested in that.

But that the importance of IT really is that if you are a dealer, you have to you know abide by all sorts of different rules and obligations, including registering. And in our space, you know, if this rule had taken effect and one twenty five, you would have seen potentially individuals who go and you know provide liquidity and liquidity providers, they these individual people who haven't absolutely know they have day jobs, they do other stuff. They just happen to, you know, stick tokens or do whatever they do.

They would have had to register as a dealer, which is just not what the statute the exchange collates at all. And you may have also seen you know quoters and software developers to create the actual um you know software that serves as know does what typically like a dealer might do， you know a human dealer er might do but there is no human here. It's just one person created this software.

Um they might be in a position where they would have to register and they would have to do all of the require rents that a typical signaler you know has to do when they you know that person typically has a whole uh, business behind this situation that would just be you know some person who never contempt that in a million years. And so we're just the world to that. The court um agreed with us and you know IT was a resulting Victory and the rules completely set aside and we're just so relieved and so happy.

Yeah that's a huge win and IT just shows the S C S. Over age and you know whether that's gary gangster agenda, maybe IT is uh and and but congress has to set the rules. And we know there's some legislation that is in the works.

One bill made out the house earlier this year. Possible one can go through the lame duck session towards the end of the year. But uh, we need congress act. But the S C, C was clearly over reaching in the courts has they have been the baLance of power here, uh, striking down a lot of these uh, unlawful activities, uh, overreach and hibcc acy and much more so just a huge win for the market because tear point this the deal rule was very far reaching and would put a lot people in a bind a when is no need to it's it's just, I don't know IT maybe it's the agenda, right? The entire crypto army agenda now does the point order genesis behind all these .

things yeah absolutely. And I thought I was really interesting. You know jua corner didn't even reach sort of our second category of claims which are you know the arbitrary a precious apa claims um because the violence of the statute the exchange act was so agreed with that he had to set aside the rule no matter what I didn't matter how you know what happened on the you know A P A arbitrary precision de because the violence of just like the peer statuary a boundaries was so clear that he you know didn't even reach that.

So I think that was like a ten or eleven page opinion that he issued because you know he never even reached that second category of plans because I was just such an aggregate violation um and so you know I think that really speaks to what were we were or currently are dealing with A B S C C, which is just sort of I mean I think the court used or phrase that was like untethered to the text and history and structure the exchange act. I mean, really the sec is acting in a way that is completely untethered to all of the grounding mechanisms that are supposed to you know a bite by. And we're just not seeing that at all.

We're not seeing them a bike by statutory you know obligations or no practice and common practice that they're supposed to follow with respect role making. I mean, it's just has been really disappointing. Um and so we were glad that you know this as you mentioned, I mean, the courts have been so experimental terms of just having us or giving us a forum where we can kind of point how to do a neutral. You we're really you know being treated unfairly here. This is not how it's supposed to work um and so IT was just such a relief to get this ruling and particularly because you know what, the rule was opposed to go into effect in twenty twenty five here regard you know in late november and uh you know we have some finally some clarity and people know that they are not going to have to be impacted by this to third all in a few months, which is great.

Yeah at to your point, this news broke yesterday along with a chair against her announcing his plants step down, uh, come january twenty, twenty, twenty five so a big change and almost serendipity that this news broke the same day. He's right. We were joking.

Yeah, we were joking that he's trying to take the attention off a viral and when do your lawsuit but um no, we we had every expectation that he was going to do this. I would have been very unusual had he chose to stay on or something like that. He my dad .

works in B2B mar keting. He came by my school for career day and said he was a big row as man. Then he told everyone how much you love calculating his return on ad spend. My friends still laugh at me to this day.

not everyone gets B2Be, but with linked in, you'll be able to reach people who do get a hundred dollar credit on your next ag campaign. Go to lincoln docta slash results to claim your credit. That's linton com flash results, terms and conditions apply.

Linked in the place to be, to be was like one rains at poors in the stop getting great news yesterday. And yeah I mean, with respect to hair gangs like you know I I think it's time for a new leadership there. I think we're all am very excited to see where the agency goes.

And you know he has funny once left and will see what happens. And certainly from a liberation and legal perspective, we are we have you been told by them that not directly but through the media a that they have no plans to take their foot off the gas. And so we are prepared to respond, uh, you know, as I needed. But IT was definitely a expected and great news to finally see that in the headlines yesterday for sure.

And you know to your point, what you are talking about, he still has a couple months left and some people are worried that you know they often say a wounded animals is the most dangerous, right? Um I don't I I I hope he doesn't do anything crazy. Uh, dropped any like a tunnel losses on his way out um but are you IT sounds like you guys are keeping your guard dogs. We don't know what's onna happen but just in case you are ready to, you know, fight back .

yeah absolutely. Um I mean, I think anyone who's banning this industry for a little while, no, I am certainly no Better in but I know enough to say that we would be fools to assume. That he was not going to uh do something more in his time um as chair.

I think we are you know pursuing the holidays here. And they um you know have definitely done things in the past where they sort dropped a new rule on a holiday or and decided to, you know drop some settlement. So if I A lawsuit, there's something like that. So you know we are gonna be prepared through the new year and I guess you know through the other side where to deal with anything that happens. You know we still have quite a few pending rules out there that he is proposed and has a you know suggested will be finalized um so to the extent of that that happens you know will be here and ready to read them and respond as I needed yeah for sure um obvious.

Ly, there's been a lot of talks of potential candidates that the trump administration could put as C, C. chair. Uh many of which, uh, a very profound pto or at least technology neutral. And uh, i'm hoping we get someone who understands the technology at these and there's a bunch of names. But uh, do you think that a new chair who's, let's say, per cypher or at least technology neutral may drop some of these cases that are not fraught related uh, that are just, you know, once again seems very silly that they you should be sued until congress passes regulation. Do you think some boy's cases may be drop next year?

So all all, you save the Normal heavy ot, which I think we all know anyway. But it's just, I mean, is impossible to say I truly have no idea who first will be or they will like or what their priorities will be. So you know there is no way of think. My hope is that um we will see you know the S C typically and again, we might have somebody come in there who is completely going to review the entire organization, ed, and so they might act in a way that we've never seen before. Um but typically the S C C is sort of load to drop a case they would rather um just lose in court and kind of a resign resources and things like that rather than just completely withdraw the complaints for example.

Um so what what you might see instead of that is you know signaling to a various defendants say, hey, if you guys approach with a reasonable um settlement offer you that you'll stop doing Y Z um we will you know at that point settled the case will drop out of court and um you know that something that we're hoping will be here a big part of a new chair ship, you know because this case is absorb so many resources at the C C. And if you have a chair who's like, why are we going after all of these people in losing um you know that's a pretty big incentive to say, okay, come in, let's let's work together on a settlement and you might have some defendants who say, no, we're gonna settle for anything. We've been sued for no reason, and we're gonna take you all the way.

And if they have the resources to do that, you know that the A C C is gonna kind of read the rewards. No appropriate in those cases because again, you can just pursue people because this is sort of like uh, a nih pet project where you hate a certain industry. Um so I think we're gonna kind of you know some movement.

There are certainly people who are pressed on resources. My couple have the opportunity to settle. And then you know the big dogs, you might see them to say we're going to go and we're going to win um and you know I would I would personally love to see that because I think you know kind of IT just feels like that that sort of what is do to the C C. After all of these years of entire ment thing are our industry yeah for sure.

And are there are other major cases you guys are working on or you kind of like in a holding pattern, lets see who comes into office as the chair and 我 go from there。

yeah. So it's really interesting right now. You know obviously, we right now chair games iller is in charge. We are you know ready and able to fight any new rules that he might put out there and support our industry if there are our new lawsuits. So there is nothing that we are you know actively taking on at the moment.

But if something happens, we are ready um and then we're going to a enter the period where there's going to be an interview chair and that is kind of um you know it's a longer period IT can be several months. And um you know we're hoping to kind of engage with some of our you know more interested staff over there, the S C C during that time and kind of see if they are interested in you know helping out with you know some new rule guide or some regulatory guidance or something like that in that interm periods. Try to get the ball rolling.

And then once we have a new chair and installed completely, um that is going to be to your point, I mean, we're really like we don't know what that's going to look like. So and a lot of IT comes down to sort of who is going to be a you know who are the division? Has that that point? What are there priorities? How much do I know about crypto? And for us, we are as an organism, not necessarily if were as a couple ahead of leal and myself, but our organization is really focused on the educational component and getting an opportunity to go into the sec and talk to whoever the new division heads are and say, look like we need to turn a fresh page.

We would love to be partners with you and get some really helpful rule making on the books because we don't know how you know effective the new congress is going to be. And you know, we're right here. We're able to talk to you and describe the issues that we're facing as an industry and help you help us become really trust where the well regulated industry that so certainly, education will be, uh, a major priority for whoever that new chair is.

And you know from a litigation perspective, i'm hoping that kind of you our role with respective S C C will be less adversary. And you know thinking about lawsuits and up like that and more are just turning to the more constructive portion of the job, which is addressing through comment letters um and you know other communications with um regulators, you know different proposals and the role making process really need you know, if that works well, IT should be you know they propose a rule. We say, hey, you missed some stuff.

These are the issues that you have. Like, let us help you understand these issues Better so that you can create a great role. And then you know they go back and finalize a much more proper rule. That hasn't been our experience over the last few years. And so we're hope get back into because there are other regulators who you know we do have constructive conversations with um so that kind of our our outlook right now, but things could always change.

Yeah and I I love the work you guys you're doing and on behalf of the industry, and it's been a lot of help and also a huge Victory.

Um and you know as you're saying that about going in and working and talking to the folks, the c we know that marky waa commercial, marky a and hater purse have boat been open minded, willing to work with the industry? Hester perses put forth so many rule proposals and guidelines over the years, but they seem to fall on deaf years within the ACC. Uh so hopefully you know maybe she's the interview chair and um you know somebody things can make its way.

You have to hit industry towards congress. That would be pretty amazing. absolutely.

You have so many proposals that you know we hope to get dusted dog at this point and really be heard now that they are going have a majority um and we're just so think about that because you bitter has been such you know active and interested participant and you know regulating our industry, which is all that we ask for really .

yeah yeah well point um Laura. Thank you and thank you to the focus of the block chain association for the great worker guys are doing and I know the fights not over even though dancers resigning but uh you know brighter days ahead and looks like twenty twenty five is gna be your progress and more working together. But thank you so much for join me.

absolutely. Thank you.