Robinhood’s Chief Legal Officer Daniel Gallagher recently voiced his concerns about the US Securities and Exchange Commission’s (SEC) approach to crypto regulation. In a written testimony submitted for a hearing before the House Financial Services Subcommittee on Digital Assets, Gallagher criticized the SEC’s handling of crypto regulations.
Gallagher highlighted Robinhood’s efforts to comply with SEC regulations, including numerous meetings and calls over an 18-month period. Despite these efforts, the company received a Wells notice from the SEC’s Enforcement Division in May. Gallagher also pointed out that the SEC staff were often unresponsive to Robinhood’s requests for guidance on moving forward with its registration proposal.
Describing the SEC’s strategy as a “scorched earth” approach, Gallagher expressed concerns about how this approach negatively impacts US crypto investors. He raised the issue of the lack of clear guidance on which digital asset transactions qualify as investment contracts, leading to multiple lawsuits by the SEC against crypto firms and hindering industry progress.
Gallagher suggested that the SEC could utilize its existing authority under Section 36 of the Securities Exchange Act of 1934 to create a framework for registering and overseeing platforms that facilitate trading in digital assets deemed investment contracts. This rulemaking could address crucial issues such as registration, consumer protections, custody requirements, and transaction reporting, potentially preventing incidents like the FTX collapse in 2022.
In terms of congressional action, Gallagher emphasized the importance of establishing a clear, comprehensive regulatory framework for digital assets. He argued that only Congress can provide the long-term regulatory clarity needed to ensure market participants can operate without constant fear of enforcement actions. This clarity is essential for maintaining the US’s leadership in responsible blockchain innovation and well-regulated digital asset markets.
In contrast to the US, Gallagher noted that Europe has made strides with the Markets in Crypto-Assets (MiCA) regulation, providing a unified framework for crypto markets and fostering innovation overseas. He emphasized the need for similar regulatory clarity in the US to support blockchain innovation and maintain competitiveness in the global digital asset market.
Overall, Gallagher’s testimony sheds light on the challenges facing the crypto industry in the US and the importance of clear regulatory frameworks for fostering innovation and protecting investors. It remains to be seen how the SEC and Congress will respond to these concerns and work towards establishing a more robust regulatory environment for digital assets.