Regulation
SEC Chair Admits Fault In DebtBox Case
In the Gary Gensler hearing today, United States Securities and Exchange Commission (SEC) Chairman was sharply criticized by lawmakers, including GOP Majority Whip Tom Emmer, over the SEC’s handling of the case involving Digital Licensing Inc., also known as DebtBox.
The case, which involved the freezing of the company’s assets based on SEC allegations, was dismissed after a federal judge found the agency had engaged in “bad faith conduct.” Judge Robert Shelby ordered the agency to pay approximately $1.8 million in attorney and receiver fees due to procedural missteps.
SEC Chair Faces Scrutiny Over DebtBox Case
During the hearing, Tom Emmer questioned Gary Gensler about the United States Securities and Exchange Commission’s approach in the DebtBox case, highlighting what he described as mishandling and regulatory overreach. Emmer called the SEC’s actions “destructive,” pointing out that the commission’s decision to freeze DebtBox’s assets was based on inaccurate information, leading the court to impose sanctions on the SEC.
🚨NEW: @GOPMajorityWhip blasts @GaryGensler about the @thedebtbox case, asking if he was embarrassed about it.
Gensler responded: “The situation was handled badly…”
Emmer used his five minutes to scorch Gensler’s approach to regulating digitals assets. Gensler was noticeably…
— Eleanor Terrett (@EleanorTerrett) September 24, 2024
Gensler acknowledged the situation was “handled badly,” expressing his frustration as Emmer continued to press on the agency’s approach to regulating digital assets.
Judge Shelby’s ruling, citing the SEC’s bad faith conduct, ordered the SEC to cover legal costs amounting to roughly $1.8 million. This included approximately $1 million in attorney fees and $750,000 for receiver fees. The judgment followed a court finding that the agency’s actions in obtaining a temporary restraining order to freeze DebtBox’s assets were unjustified, and the case was ultimately dismissed without prejudice.
Hester Peirce Criticizes SEC’s Regulatory Approach
Commissioner Hester Peirce was vocal in her criticism of the SEC’s stance on cryptocurrency regulation, directly challenging Gensler’s leadership.
Peirce argued that the agency has taken a legally imprecise approach, which has contributed to a lack of clarity within the industry. She stated, “We have fallen down on our duty as a regulator not to be precise,” emphasizing that this ambiguity has left stakeholders uncertain about the SEC’s regulatory boundaries.
Peirce further criticized the United States Securities and Exchange Commission and practice of regulation by enforcement, describing it as inefficient and unhelpful for providing market participants with clear guidelines. She suggested that the agency should engage in more fact-finding activities, such as roundtables, before making significant regulatory decisions, rather than relying heavily on enforcement actions to set precedents.
Brad Sherman and Patrick McHenry Address Crypto Regulation
Brad Sherman was among the first to raise the issue of cryptocurrency during the hearing, expressing concerns about the lack of regulatory clarity. He emphasized that while the SEC has the authority to protect investors, the commission should strive for more explicit guidance on digital assets. Sherman’s comments followed remarks by Patrick McHenry, who also questioned the SEC’s handling of crypto assets, specifically mentioning Ether, the native token of the Ethereum blockchain.
McHenry confronted Gensler about the various terms used by the SEC to describe digital assets, including crypto tokens and digital asset securities, questioning whether the agency distinguishes between these terms. The SEC Chair responded by insisting that the laws are clear, but McHenry pushed back, arguing that the SEC’s inconsistent terminology reflects a broader lack of regulatory clarity.
In response to criticism, Gary Gensler maintained that the SEC remains “merit neutral” on blockchain technology, stating that the technology itself does not alter the fundamental economics of investments. He reiterated that the United States Securities and Exchange Commission’s role is to ensure compliance with existing laws rather than to evaluate the merits of specific investments.
However, Gensler’s defense did little to quell the concerns raised by lawmakers and SEC commissioners, who continued to press for clearer guidelines on the regulatory treatment of digital assets.
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.
Regulation
Polymarket Faces French Ban After Massive Bets On US Election Results
Polymarket, a crypto-based prediction market, is likely to be prohibited by France’s gambling regulator, the ANJ, after a huge amount of bets were placed on the 2024 U.S. presidential election. Since the global audience engaged in prediction platforms, Polymarket experienced a record jump, with $450 million expected to be distributed to users following the victory of Donald Trump.
This increase of betting volume and large stakes has become a matter of concern for the French regulator because the platform offers unlicensed gambling services.
$450 Million in Payouts Expected After U.S. Election Bets
Prediction markets, which are expected to increase their payout to election bettors to around $450m following Donald Trump’s projected win, are attracting increasing attention.
Although conventional polls pointed to a closer contest, prediction markets such as Polymarket and Kalshi recorded a steep rise in Trump’s chances in the last few days, indicating a strong divergence with poll-based expectations.
Among the active users of Polymarket, a French trader called “Theo” made a $26 million bet on Trump’s win and won $49 million. This big bet made Polymarket popular, as the French authorities paid attention to the platform and its popularity among French residents, which led to concerns about the compliance of the platform with French gambling legislation.
France’s ANJ Considers Blocking Access to Polymarket
The ANJ has claimed that Polymarket is involved in gambling which is only allowed in France by licensed operators. According to local media, the regulator has the power to ban access to unlicensed gambling sites and is expected to restrict access to Polymarket soon.
An ANJ insider said: “Polymarket is just betting on something that is completely uncertain, which is exactly what gambling is.”
If put in place, the ban would prevent the usage of the application in France, despite the fact that users can still try to avoid the restriction by connecting to VPN. The ANJ could also try to influence media outlets and directories to stop advertising or linking to Polymarket and, thus, limit its audiences even more.
Regulatory Concerns Over Market Manipulation
The high level of activity on Polymarket has led to speculations that the platform may be used for market manipulation. Two blockchain analysis firms, Chaos Labs and Inca Digital, recently revealed that there was potential wash trading within Polymarket’s U.S. presidential betting market where the same assets are bought and sold to simply create a fake market. This type of trading is rather manipulative and can lead to the distortion of signals on the market and mislead other participants.
The US Commodity Futures Trading Commission also has concerns about prediction markets and put forward a rule in May aiming at stricter regulation of such markets due to the potential for manipulation.
Although no final decision has been reached, regulatory actions could impact Polymarket’s ability to operate freely in other markets, including the U.S.
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.
Regulation
FTX Co Founder Gary Wang Appeals For No Jail Time, Here’s Why
FTX co-founder Gary Wang has requested a federal judge not to send him to prison. He noted that he is testifying against the former business partner, Sam Bankman-Fried, someone he has known for a long time in a fraud case.
The lawyer for Wang submitted a sentencing memo in Manhattan federal court wherein he claimed that his client should not be incarcerated as he provided assistance to the prosecutors as well as his role in the scheme was comparatively less.
Wang, who pleaded guilty to fraud and conspiracy when FTX went bankrupt in 2022, is to receive his sentencing on the 20th of November.
FTX Co-Founder Gary Wang Appeals for No Jail Time
The defense counsel for FTX co-founder Gary Wang highlighted his client’s early cooperation with the federal prosecutors as one of the key reasons why the court should consider him for mercy. According to Graff, Wang was one of the first FTX executives to meet with the authorities and share information on the FTX and Alameda Research. Wang gave a testimony in the trial that led to the recent conviction of Bankman-Fried who was sentenced to 25 years in prison.
Speaking at the trial, Wang described how he was ordered to change the code of FTX in order to enable Alameda Research to use the assets of the company’s clients, which is one of the key points of Bankman-Fried’s fraud.
FTX co-founder’s lawyer noted that his involvement in the fraud was less than some of the other former executives, including Caroline Ellison, former CEO of Alameda Research, and Nishad Singh, FTX’s former head of engineering. Wang, his lawyer said, did not start or operate the scheme and was not personally involved in the provision of false information to the investors.
“Gary was not involved in the scheme at its inception, was never provided with details of the scheme, and, in contrast to Bankman-Fried, Ellison and Singh, never engaged in any affirmative action of deception,” Graff wrote.
Sentencing Comparisons to Other Executives
Wang’s attorney argued that a prison sentence would create an “unwarranted sentencing disparity” with Nishad Singh, who avoided jail time after pleading guilty and cooperating with the government. Singh, who faced potential decades-long sentences, was ultimately sentenced to time served and three years of supervised release.
Ellison, another major cooperator, received a two-year prison sentence. FTX co-founder Gary Wang contended that Wang’s level of involvement was even lower than Singh’s, supporting a non-custodial sentence for Wang as well.
Graff also noted Wang’s personal circumstances, stating that Wang is expecting the birth of his first child shortly after his sentencing date. Wang’s attorney suggested that allowing him to remain with his family would align with the court’s treatment of other cooperators in the case.
“Gary wants nothing more than to be a good husband and father and to continue his work to facilitate FTX victims’ recovery,” Graff wrote.
Separately, the U.S. government is working to reclaim approximately $13.25 million in political donations made by FTX executives, including Bankman-Fried and Singh. Judge Lewis Kaplan however granted the government additional time to negotiate the return of these funds, extending discussions with the PACs until January 15, 2025.
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.
Regulation
US SEC Files Motion for Judgment Against Kraken, Challenges Key Defenses
The U.S. Securities and Exchange Commission (SEC) has filed a motion seeking judgment in its case against cryptocurrency exchange Kraken, focusing on defenses such as “fair notice” and the “major questions doctrine.”
This move, led by SEC Chairman Gary Gensler’s team, aims to limit further discovery into the agency’s regulatory policies, particularly those affecting the crypto sector. The timing of the filing has drawn attention, as some in the industry view it as a strategic attempt to shield the SEC’s methods from closer examination.
US SEC Files Motion for Judgment Against Kraken
The SEC’s motion seeks to dismiss defenses put forward by Kraken that include the fair notice defense and the major questions doctrine. The fair notice defense argues that Kraken did not receive adequate regulatory guidance regarding its crypto-related activities.
Meanwhile, the major questions doctrine suggests that regulatory agencies, such as the SEC, should not make major policy decisions without clear direction from Congress.
Subsequently, the US SEC’s motion appears intended to prevent further discovery into its policies, which Kraken and other crypto advocates have criticized as inconsistent and unclear. A similar motion was filed in Ripple case, where the US SEC failed to secure a judgment. Michael O’Connor, an attorney representing Kraken expects a similar outcome in the Kraken case, though Kraken has indicated that it has additional defenses should this motion proceed.
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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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