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Rep McHenry Calls for Overturn of Biden Veto on SEC SAB 121

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2 months ago

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Representative Patrick McHenry, Chairman of the House Financial Services Committee, has made a strong case for overturning President Biden’s veto of a resolution that aimed to block the Securities and Exchange Commission’s Staff Accounting Bulletin No. 121 (SAB 121).

Rep McHenry Calls for Overturn of Biden Veto

During a recent session on the House, Representative Patrick McHenry engaged fellow Republicans in a debate when they were debating the President’s veto of H. J. Res. 109. This resolution aims at disapproving the SEC’s rule on Staff Accounting Bulletin No. 121 relating to banks’ digital asset custody.

The debate underscored the bipartisan nature of the disapproval that previously garnered wide support in both the House and Senate. McHenry stressed that the resolution was vital in revising the US policy on digital assets and encouraged his colleagues to vote in favor of the motion to override the veto.

In his speech, McHenry took a swipe at the present administration for supporting bureaucratic decisions that, in his opinion, work against the people’s best interest. He mentioned the general support of the original Congressional Review Act (CRA) resolution and the subsequent passage of the Financial Innovation and Technology (FIT) for the 21st Century Act that endorsed the repeal of SAB 121.

Bipartisan Support and Legislative Context

The legislative journey of the resolution, H.J. Res. 109, reflects significant bipartisan cooperation. . At first, both houses of Congress approved the resolution with a large margin, a trend that is also observed in the recent passage of the FIT21 Act.

Moreover, this Act which contained provisions concerning the digital asset market structures was also passed with the support of many members of the two parties including 71 from the President’s own party.

Therefore, this bipartisan position on SAB 121 suggests that there is a coordinated push by legislators to alter the SEC’s stance on the regulation of digital assets. McHenry and other critics of SAB 121 have noted that the rule unduly burdens banks, restricts consumer choices for asset custody, and alters long-standing industry norms without clear rationale.

Mike Flood Criticizes SEC Overreach

In addition, during the debate, Representative Mike Flood also expressed a negative view towards the implementation of SAB 121 by the SEC. He noted that the SEC’s actions under Gensler are beyond its scope in that other bodies like the Federal Reserve and the Treasury Department should handle such roles.

Flood said,

“The SEC was caught with its hand in the cookie jar. They have gone too far in a very obvious manner that is against the best interest of investors. SAB 121 is not a political issue; it is simply a bad rule.”

Flood argued that SAB 121 weakens the conventional bank custody frameworks through the adoption of measures that are inapplicable to the banking sector’s operations.

Read Also: Fed Chair Powell Voices Strong Support for Stablecoin Regulation

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The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.





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Regulation

CFTC Appeals Decision Favoring Kalshi On Election Betting Contracts

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9 hours ago

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September 20, 2024

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The U.S. Commodity Futures Trading Commission (CFTC) is challenging a recent court decision that would allow prediction market platform Kalshi to offer contracts related to U.S. election outcomes. The ongoing legal battle has raised concerns about the integrity of election betting and the extent of the CFTC’s regulatory authority.

Court Hearing Pits CFTC Against Kalshi

At a hearing before the U.S. Court of Appeals for the District of Columbia Circuit, CFTC General Counsel Rob Schwartz and Kalshi’s counsel Yaakov Roth argued as to why the firm should be allowed to operate political prediction markets. The hearing was held after a district court decision that said the CFTC cannot stop it from offering contracts based on which party will control both the houses of the Congress.

Soon after the decision, the CFTC went for an application for a temporary stay which was granted by the appeals court.

The three judges, Patricia Millett, Cornelia Pillard and Florence Pan, challenged both the arguments and appeared rather skeptical of the reasoning provided. The judges questioned the CFTC about its view on the Commodity Exchange Act, as well as the consequences of permitting the opportunity to place a bet on the electoral outcome.

Concerns Over Market Manipulation and Election Integrity

The U.S. Commodity Futures Trading Commission’s concerns included threats to market integrity and manipulation of election-related prediction markets. Schwartz pointed out that the political prediction markets are more susceptible to false information and manipulation as compared to other event markets.

He stated that permitting these contracts could lead to misperceptions among the public and thus erode the already weak confidence in the U. S. elections, particularly during a time when more citizens doubt the validity of the electoral system.

Schwartz also noted that while traditional futures contracts are based on factual and accurate information, political markets could be skewed by fake polls, fake news, and other agenda-driven media. He noted that the CFTC cannot adequately monitor these underlying events and therefore it remains challenging to promote fairness and transparency in the markets.

Kalshi Defends Market Viability and Regulatory Compliance

Kalshi’s attorney, Yaakov Roth, pushed back against the concerns surrounding Kalshi’s compliance measures, noting that regulated prediction markets are more transparent and provide more oversight than less regulated foreign platforms. Roth argued that markets that are supported by a robust and comprehensive legal regime are less likely to be manipulated than the unregulated foreign markets that Kalshi seeks to compete with, while operating in a regulated environment.

According to Roth, the firm has also incorporated ‘Know Your Customer’ measures to ascertain that only approved market players transact and recommended that there should be a local regulated market to overcome the dependency on overseas markets with less transparency. He maintained that permitting these regulated prediction markets would offer better protection to the participants and minimize the chances of distortion by foreign elements.

Hence, in the upcoming 2024 U. S. elections, the appeals court is expected to make a ruling as soon as possible. The CFTC has been working on a regulation that is likely to prohibit the trading on political events as the commission says that such contracts are detrimental to the public interest. Legal experts have argued that the courts or the legislature may have to step in and offer guidance on the future of election-related prediction markets.

CFTC Chairperson Rostin Behnam has also expressed concerns over the likelihood of the financial regulator being involved in election contracts, saying that such actions may be outside the scope of the agency.

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Kelvin is a distinguished writer with expertise in crypto and finance, holding a Bachelor’s degree in Actuarial Science. Known for his incisive analysis and insightful content, he possesses a strong command of English and excels in conducting thorough research and delivering timely cryptocurrency market updates.

Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.





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Coinbase CLO Debunks SEC Crypto Asset Security Claims Before Gensler Hearing

Published

10 hours ago

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September 20, 2024

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Coinbase CLO Paul Grewal and Ripple CLO have challenged the SEC’s terminology of “crypto asset security,” a term increasingly used by the regulatory agency. His criticism comes at a time when the SEC is under pressure for coming up with this term yet there is no law in the United States that supports it.

The issue has gained much attention especially given that the SEC Chair, Gary Gensler and all the five SEC Commissioners are expected to appear before the House Financial Services Committee in a hearing.

Coinbase CLO Questions SEC’s Use of “Crypto Asset Security” 

Grewal posted on X to comment that the term “crypto asset security” is not uniform or well-established in the SEC enforcement measures. The Coinbase CLO also noted that the SEC has been inconsistent in its treatment of tokens as securities and as investment contracts in different legal contexts.

Such allegations come as Rep. Ritchie Torres, a New York Congressman, has made similar concerns earlier this month during a congressional hearing and challenged the SEC’sterminology.

The term ‘digital asset security’ or ‘crypto asset security’ is also not found in any law, regulation or Supreme Court judgement which adds to the criticism from the proponents of blockchain and lawmakers. Some of the legal scholars have also opined that the SEC made up the term without any statutory backing, including Daniel Gallagher, the Chief Legal Officer at Robinhood.

Ripple’s Legal Officer Joins the Criticism

Ripple CLO, Stuart Alderoty, also shared similar sentiments with the Coinbase CLO, saying that the SEC is taking advantage of the terminology used in the court. Alderoty noted that the SEC’s continued reference to “crypto asset security” in legal documents has begun to raise pushback.

For instance, the SEC recently apologized for using the term in the complaint against Binance, acknowledging that its use was misleading.

This critique comes at a time when Ripple is still in a legal tussle with the SEC over the status of XRP as a security. Alderoty argued that the SEC’s inconsistencies are eroding its capability to be convincing in the courts.

SEC Under Scrutiny Ahead of Congressional Testimony

Next week, all five SEC Commissioners, including Chair Gary Gensler, will testify before the House Financial Services Committee, which is the first time since 2019 when the whole commission will stand before Congress. This hearing comes in the backdrop of a growing sentiment among legislators and industry participants who have accused the SEC of having a hostile approach towards blockchain technology.

Some of the key concerns have been expressed by House Majority Whip Tom Emmer and Chairman Patrick McHenry regarding the SEC’s stance on regulating crypto airdrops that they consider crucial for decentralizing blockchain networks. Some of them directly accused the agency of brushing up the issues asserting that its regulation model inaptly fits the growing digital asset sector.

Apart from Coinbase CLO and Ripple CLO challenging the legal direction of the SEC, Gensler faces the probe over allegations of Illegal hiring at the company. This probe may complicate his upcoming hearings before the House Financial Services Committee where he is likely to face questions not only about the SEC’s stance to digital assets but also concerning the agency’s management.

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Kelvin is a distinguished writer with expertise in crypto and finance, holding a Bachelor’s degree in Actuarial Science. Known for his incisive analysis and insightful content, he possesses a strong command of English and excels in conducting thorough research and delivering timely cryptocurrency market updates.

Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.





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Texas Court Dismisses Consensys Suit Against SEC on Procedural Basis

Published

11 hours ago

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September 19, 2024

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The United States District Court for the Northern District of Texas dismissed Consensys Software Inc.‘s case against the Securities and Exchange Commission. This was after a long legal battle to determine the status of Ethereum and other similar software products.

Texas Court Ends Consensys Suit Against SEC

The U.S. District Court in Fort Worth has thrown out the allegations made by Consensys against the Securities and Exchange Commission in a recent legal move. The court, presided over by Judge Reed O’Connor, ruled on procedural grounds. The judge determined the claims concerning Ethereum classification and the regulatory approach to MetaMask were not ripe for judicial review. This decision effectively puts an end to the current litigation initiated by Consensys in April of this year.

The dismissal focused particularly on the lack of final agency action from the SEC, which the court noted was a requisite for a substantial legal challenge. This procedural dismissal indicates that despite the issues raised, the court decided not to proceed with evaluating the merits of the case.

Legal Battle Over Ethereum and MetaMask

Initially, Consensys challenged the SEC’s classification of Ethereum and its derivatives as securities. The complaint highlighted concerns over the SEC’s focus on MetaMask, a software service provided by Consensys that facilitates crypto transactions and staking. 

Despite an earlier notification in June about the SEC dropping its investigation into Ethereum, the broader implications of this regulatory scrutiny remained a contentious issue.

Subsequent to the initial lawsuit, the SEC initiated a separate enforcement action in June, accusing Consensys of operating its MetaMask swaps service without proper registration. 

In addition, according to Judge O’Connor, this case lacked the necessary finality from the Securities and Exchange Commission side to be considered ready for court adjudication.

Reactions and Future Regulatory Steps

The court’s decision to dismiss on procedural grounds does not conclude the legal issues surrounding the regulation of Ethereum and other blockchain technologies. 

More so, Consensys has expressed its intention to continue advocating for blockchain developers and to challenge the SEC’s actions in other jurisdictions, indicating that the struggle over crypto regulation in the U.S. is far from over. The case’s dismissal in Texas does not preclude the blockchain company from pursuing other legal avenues to address their grievances.

In addition, most recently, a US Bankruptcy judge Brendan Shannon approved Terraform Labs plan to liquidate its assets following an ongoing SEC lawsuit.

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Ronny Mugendi is a seasoned crypto journalist with four years of professional experience, having contributed significantly to various media outlets on cryptocurrency trends and technologies. His work includes notable contributions to Cryptopolitan and Coingape News Media, where he shares his insights on the latest developments in the cryptocurrency market. Outside of his journalism career, Ronny enjoys the thrill of bike riding, exploring new trails and landscapes.

Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.





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