Gary Gensler, the chair of the U.S. Securities and Exchange Commission (SEC), is a controversial figure in the cryptocurrency and blockchain industry. Gensler’s tenure has seen aggressive regulatory actions, yet it has also been marked by a stunning lack of clarity on some of the most critical issues that companies and investors in the space face.

This article examines Gensler’s contradictory actions, his close ties to key industry players like the notorious Caroline Ellison of FTX, and how his refusal to provide basic clarity on essential matters—like whether Ethereum is a security—undermines confidence in the entire blockchain ecosystem.

Before assuming his role at the SEC, Gary Gensler was a professor at MIT’s Sloan School of Management, where he taught courses on blockchain and digital currencies. At MIT, Gensler was a bold advocate for the blockchain’s transformative potential. He often talked about how the “decentralization” of such a system could transform financial arrangements and empower individuals in and out of a banking system. During this period, Gensler’s public lecture circuit made him a kind of blockchain evangelist—a forward-thinking proponent of innovation in an otherwise staid financial sector.

However, Gensler has taken a sharply different line since taking the helm at the SEC. His actions now seem to be directed toward stifling blockchain innovation in the U.S. through what many regard as heavy-handed and sometimes downright ridiculous regulations. This shift raises huge concerns about Gensler’s motives and whether his current actions align with the best interests of the public and the industry.

During Gensler’s tenure, one of the most unsettling aspects has been his inability to offer a coherent reply to the extremely important question of whether Ethereum is a security under U.S. law. At a congressional hearing, Gensler was directly asked whether Ethereum was a security, a question that any reasonable observer would assume had a straightforward answer.

Did he provide that answer? No. In fact, he didn’t even come close. Instead, he skirted the question while making it abundantly clear to everyone in attendance that they should not expect to leave the hearing with any greater understanding of the issue than when they entered it.

The absence of clarity is not just frustrating; it signifies a serious shortcoming in the leadership of the regulator. The SEC has a straightforward mission: to provide clear rules of the road and to protect investors. Yet under Chairman Gary Gensler, the agency seems unable to do either. When Gensler was asked whether Ethereum is a security. The answer he gave — or rather, did not give — was, in essence, “I can’t say.”

The credibility of Gensler is questioned even further because of his ties to people linked with FTX, the notorious cryptocurrency exchange that collapsed back in 2022. Among these affiliations is Caroline Ellison, the former CEO of Alameda Research, the trading wing of FTX. The connections Gensler has with Ellison are not just professional; she is also a family friend of Gensler’s, and her father, Glenn Ellison, is a professor of economics at MIT who has previously worked very closely with Gensler.

Gensler and Ellison’s close professional relationship at MIT raises serious questions about whether the former’s personal connections influenced him in his regulatory role concerning the latter’s company, FTX, which had been operating out of the Bahamas. In fact, despite questionable practices going on at FTX, Gensler’s SEC did not launch a significant investigation into the operations of the company until it was very obvious that their business model wasn’t sustainable and it’s downfall was imminent.

Additionally, Gensler’s ethics are further called into question after reports surfaced of a private meeting with Sam Bankman-Fried, the founder of FTX, that took place just before the exchange’s demise. As reported by the New York Post, this sit-down raised genuine concerns about whether Gensler is truly impartial. Did he as the head of a key regulatory agency, cross the line by engaging with a prominent figure in the cryptocurrency sector he was supposed to oversee?

When you look at the SEC’s actions against other big crypto exchanges, like Kraken and Binance, the slow response to FTX’s downfall seems very slow. And in fact, it feels so much slower that you have to wonder if the close ties of FTX to the SEC’s chair, Gary Gensler had something to do with it.

The difference in how the SEC enforces the law against crypto firms raises serious and obvious questions about Chairman Gary Gensler’s impartiality. Why did the SEC go after crypto trading platforms like Binance and Kraken but not the troubled crypto exchange FTX? Were Gensler’s judgment and the SEC’s timing affected by some too-cozy-for-comfort connections that Gensler had with key figures at FTX?

There is another serious issue with Gensler’s time at the helm of the SEC, and that is his misleading statements about the collapses of Signature and Silvergate banks. Gensler systematically overstates the SEC’s authority in trying to prevent such bank failures from happening again. He suggests that those banks failed because they were involved with the cryptocurrency industry. He has never provided solid evidence to back up this claim, and for good reason. The real reasons both banks failed have to do with exposure to interest rate risk, an inadequate risk management culture, and a lack of diversification.

For example, Signature had significant exposure to long-term bonds and other interest-rate-sensitive assets. When the Fed started the most rapid raising of interest rates in history, the value of those assets fell sharply—leading to billions in unrealized losses on the Signature balance sheet. Meanwhile, Silvergate got caught up in a liquidity crisis largely of its own making due to its excessive reliance on a few very big customers, who suddenly decided to withdraw their deposits when market conditions deteriorated.

Clearly, the bank failures and their relation to cryptocurrency had nothing to do with poor regulation or inadequate regulatory frameworks in the crypto space. They were caused by something else entirely. And yet, Gary Gensler, the chair of the Securities and Exchange Commission (SEC), has been trying to link those failures to the SEC’s supposed mission to protect investors and maintain fair, orderly, and efficient markets. In other words, he’s been using the recent closure of these banks to smear the reputation of the crypto industry and justify his regulatory overreach.

The growing NFT market has also drawn the attention of the SEC and its head, Gary Gensler. A recent Wells Notice issued to OpenSea, the top NFT marketplace, offers a glimpse into Gensler’s aggressive regulatory tactics. The Wells Notice suggests that certain NFTs traded there may be securities, which would make them subject to rigorous SEC oversight.

The NFT community has been rocked by this action, resulting in widespread fear and intense uncertainty among all who work and participate within the space. The way Gensler has gone about this—trying to shove NFTs into a mold meant for traditional securities—makes no sense. It doesn’t make sense because, unlike securities, the NFT market has largely been about the opportunity for consumers to enjoy what they buy. Alas, that opportunity now also seems at risk, as the entire space faces possible over-regulation.

Gary Gensler’s time as head of the SEC has been dogged by what appears to be complete incompetence. Gensler’s broad and often unclear interpretation of what constitutes a security has led to numerous legal challenges against the SEC. Many of those have ended in court losses for the SEC. Gensler’s regulatory strategy is, at best, on shaky ground.

For example, the SEC’s ongoing battle with Ripple Labs over the classification of XRP has been legally troublesome for the SEC with Ripple Labs experiencing some significant legal wins. The SEC have been losing a lot of ground in the courts, and this raises serious question of whether Gary Gensler is up to the task of steering the agency in a direction that will result in anything like fair, effective, and reasonable regulation.

The impact of Gensler’s actions—his refusal to offer guidance on Ethereum, his ties to FTX, his misleading comments about Signature and Silvergate banks, and his all-out offensive against the crypto and NFT market—makes him look like a rogue regulator who is overstepping his mark. His lack of transparency and inconsistent approach aren’t just issues of incompetence; they are actively harming the blockchain industry. With these actions, Gensler is driving blockchain innovation out of the United States, creating an atmosphere of fear and uncertainty, and undermining the very principles of decentralization and empowerment that blockchain technology was supposed to uphold.

The SEC under Gary Gensler has shown itself to be untrustworthy, inconsistent, and dangerously overreaching. At its helm, Gensler is a critical regulator and, frankly, a pretty poor leader. When he answers questions, it is often with misdirection that serves his purposes. Perhaps the most egregious example is his refusal to answer the simple question, “Is Ethereum a security?” In Gensler’s SEC, regulatory clarity is not a goal; rather, the goal is to extend the reach of the regulator into the crypto cosmos. Indeed, Gensler’s SEC appears to have no concern for the future of crypto, its companies, or investors. Instead, it acts as if it is seeking to ensure that crypto has no future at all.

This article represents the author’s analysis and opinion based on public information and is intended to encourage discussion and scrutiny of Gary Gensler’s actions as SEC Chair.

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