In a rare public rebuke of his own agency, SEC Commissioner Mark Uyeda called the Securities and Exchange Commission’s approach to cryptocurrency regulation a “disaster” during a Fox Business interview yesterday, exposing deep internal divisions over how the regulator has handled the digital asset industry.
Uyeda’s stark criticism, delivered on Fox Business’s “Mornings with Maria,” represents one of the most pointed public challenges to Chair Gary Gensler’s enforcement-first strategy that has defined the SEC’s crypto policy over the past several years. The timing is particularly notable, coming just one day after cryptocurrency exchange Crypto.com filed a federal lawsuit against the SEC, alleging regulatory overreach.
“Policy Through Enforcement” Under Fire
Commissioner Uyeda’s central criticism targets what he describes as the SEC’s reliance on enforcement actions rather than clear regulatory guidance to shape crypto policy—a strategy that has left the industry navigating conflicting court decisions and regulatory uncertainty.
“Our policies and our approach over the last several years have been just really a disaster for the whole industry,” Uyeda stated bluntly. “We have been sending this policy through enforcement, we’ve done nothing to provide guidance on it, and as a result, this has been achieved by the courts, and different courts have ruled different ways.”
The Commissioner’s remarks highlight a fundamental disagreement within the SEC about how to regulate an industry that didn’t exist when most securities laws were written. While Chair Gensler has repeatedly insisted that “the rules of the road are clear” and that most cryptocurrencies are securities subject to existing law, Uyeda argues that the agency has failed to provide the clarity the industry needs to operate legally.
When asked what the SEC could or should do differently, Uyeda was direct: the agency needs “to lay out some clear guidance and interpretations on what exactly falls within and falls outside of the securities laws.” This call for explicit rulemaking stands in sharp contrast to the Gensler-led approach of case-by-case enforcement.
The inconsistent court rulings Uyeda referenced have created a patchwork of precedents that vary by jurisdiction. The SEC’s enforcement actions have produced different outcomes in different courts, with some judges accepting the agency’s broad interpretation of securities law while others have pushed back, leaving crypto firms uncertain about which activities cross legal lines.
Crypto.com Lawsuit Highlights Regulatory Tensions
Uyeda’s comments came against the backdrop of mounting legal challenges to the SEC’s crypto enforcement strategy. On October 8, Singapore-based cryptocurrency exchange Crypto.com filed a lawsuit against the SEC, Chair Gary Gensler, and the agency’s four commissioners after receiving a Wells Notice—a formal notification that the SEC intends to bring enforcement action.
The Crypto.com lawsuit, filed in federal court, contends that the SEC has “unilaterally expanded its jurisdiction beyond statutory limits” and alleges the agency has established an unlawful rule declaring that trades in nearly all crypto assets are securities transactions regardless of how they are sold. The exchange argues this represents a fundamental overreach of the SEC’s congressionally mandated authority.
According to the lawsuit, the SEC had been investigating Crypto.com for more than two years, with a formal investigation initiated on March 28, 2023. The Wells Notice, sent on August 22, indicated the regulator’s intention to sue the digital asset exchange for operating as an unregistered broker-dealer and securities clearing agency.
Crypto.com’s legal challenge is part of a broader pattern of crypto firms pushing back against SEC enforcement. The exchange joins companies like Ripple, Coinbase, and others in arguing that the SEC is applying decades-old securities laws to technology that fundamentally differs from traditional securities and that Congress never intended these laws to cover.
The exchange has also taken the unusual step of filing a petition with both the Commodities Futures Trading Commission (CFTC) and SEC seeking a joint interpretation confirming that certain crypto derivative products fall solely under CFTC regulation—highlighting the jurisdictional confusion that has plagued the industry.
Internal Discord and Industry Frustration
Uyeda’s public criticism exposes what many industry observers have long suspected: significant disagreement within the SEC about how to regulate cryptocurrency. While commissioners typically maintain a united public front, Uyeda’s comments suggest deeper fissures in the agency’s approach to one of the most consequential regulatory questions of the decade.
The Commissioner’s remarks echo complaints that have been mounting from industry participants for years. Ripple CEO Brad Garlinghouse, whose company has been fighting an SEC enforcement action since 2020, has repeatedly criticized what he calls the agency’s “regulation by enforcement” approach that punishes companies for violations of rules that were never clearly articulated.
Even more pointed criticism has come from policy experts like Justin Slaughter, Vice President of Government Affairs at crypto venture firm Paradigm, who has suggested that Chair Gensler’s approach appears designed to “destroy crypto” rather than provide a workable regulatory framework.
Chair Gensler has consistently defended the enforcement-first strategy, arguing that crypto firms have deliberately avoided compliance with securities laws and that existing regulations apply clearly to digital assets. “Without a cop on the beat, will all our laws be enforced?” Gensler has asked rhetorically when questioned about the SEC’s aggressive enforcement posture.
However, Uyeda’s comments suggest that at least some SEC commissioners believe the “cop on the beat” analogy fails when the rules of the road haven’t been clearly marked. The result, according to Uyeda, has been a regulatory environment that simultaneously stifles innovation and fails to provide the investor protections that securities law is meant to ensure.
What Clarity Could Look Like
The call for regulatory clarity isn’t new, but coming from a sitting SEC Commissioner, it carries particular weight. Industry participants have long requested that the SEC provide clear guidance on key questions: Which crypto assets are securities? What activities trigger broker-dealer registration requirements? How should decentralized protocols be evaluated under securities law?
Some argue that the SEC should follow the approach taken by other regulators, such as the CFTC, which has provided more explicit guidance about which digital assets fall under its jurisdiction. Others point to international examples, where regulators in jurisdictions like Singapore and the European Union have developed comprehensive crypto-specific regulatory frameworks rather than attempting to fit digital assets into existing securities law.
The challenge, as Uyeda’s comments highlight, is that years of enforcement-first policy have created a landscape where legal precedent varies by jurisdiction, companies face existential uncertainty about compliance, and innovation increasingly moves offshore to jurisdictions with clearer rules. Breaking this cycle may require the kind of explicit rulemaking that Uyeda advocates—but that would represent a significant departure from the current SEC leadership’s approach.
The Path Forward Remains Uncertain
As the 2024 election approaches, cryptocurrency regulation has emerged as an increasingly partisan issue, with Republican candidates generally advocating for clearer rules and lighter enforcement while Democrats have largely supported the SEC’s current approach. The outcome of the election could significantly influence whether the agency shifts toward the clarity Uyeda advocates or continues down the enforcement path.
For now, the crypto industry faces a regulatory environment that even one of the regulators describes as a “disaster”—a remarkable admission that underscores the profound challenges in adapting 20th-century securities law to 21st-century digital assets. Until the SEC provides the clear guidance Uyeda calls for, or until Congress steps in with crypto-specific legislation, the industry will continue navigating the uncertain terrain of enforcement actions and conflicting court decisions.
What’s clear from Commissioner Uyeda’s extraordinary public criticism is that the current approach satisfies neither the industry seeking to operate legally nor all the regulators tasked with overseeing it. The question is whether this internal discord will catalyze the kind of policy clarity the industry has sought for years, or whether the enforcement-first strategy will persist regardless of its effectiveness.
As of October 11, 2024, the SEC has not responded to Commissioner Uyeda’s public criticism or to Crypto.com’s lawsuit. The agency’s approach to crypto regulation remains a subject of intense debate within the financial regulatory community and the broader digital asset industry.
