The crypto community is calling out the hypocrisy of Gary Gensler, the head of the United States securities regulator, after a 2018 video emerged of him stating that cryptocurrencies are on par with commodities or cash and are not securities.
The video came from a “Blockchain and Money” class in the Fall Semester of 2018 taught by Gensler, a former professor at the Massachusetts Institute of Technology (MIT) before he became chair of the Securities and Exchange Commission (SEC).
On the topic of initial coin offerings (ICOs), Gensler said that “three-quarters of the market are not ICOs or not what would be called securities” and named the U.S., Canadian and Taiwanese markets as the “three jurisdictions that follow something similar to the Howey Test.”
“Three-quarters of the market is non-securities, it’s just a commodity, cash,crypto,” Gensler then said.
The below clip is from a Fall 2018 Graduate MIT course called “Blockchain and Money”
Gary Gensler – the current President of the SEC, was the professor.
The Hypocrisy speaks for itself
“So we already know in the US and in many other jurisdictions that 3/4 of the market… pic.twitter.com/rjRWeq5P8X
— zk- (@ZK_shark) April 25, 2023
While Gensler briefly acknowledged that ICOs may spark a securities debate, he concluded that “three-quarters of the market is not particularly relevant as a legal matter.”
Several members of the crypto community were stunned by Gensler’s remarks.
Coinbase CEO Brian Armstrong commented a mere “Wow” in response to an April 26 Twitter post shared by cryptocurrency researcher “zk-SHARK.”
— Brian Armstrong ️ (@brian_armstrong) April 26, 2023
Erik Voorhees, the founder of crypto trading platform ShapeShift asked “When does someone get arrested for fraud?” in an April 25 Twitter post to his 658,900 followers.
When does someone get arrested for fraud? https://t.co/5BtU2sT5x2
— Erik Voorhees (@ErikVoorhees) April 25, 2023
Farokh Sarmad, the founder of Web3 podcast Rug Radio called Gensler “disgusting” in a tweet to his 346,200 followers, while a systems engineer, named “JD” called on the SEC Chair to provide an explanation behind the change in opinion.
Not everyone saw eye to eye though.
U.S. lawyer Preston Byrne explained that professors and law enforcers work in “different capacities” and Gensler shouldn’t be held to the same views he had back then.
I see a lot of people giving Gary Gensler a hard time over this but it’s important to note the different capacities in which he’s speaking. As a professor, he can talk about what things are in the abstract. As a law enforcer, he’s required to enforce the laws as they’re written. https://t.co/mYhd7Hm8I9
— Preston Byrne (@prestonjbyrne) April 26, 2023
Another U.S. lawyer, Jonathan Schmalfeld, who specializes in blockchain technology, challenged Byrne’s opinion by stating that Gensler’s interpretation of the Howey Test shouldn’t change by virtue of his capacity. The response prompted a second explanation from Byrne:
“I mean when I talk with clients about this stuff there are three answers, what I think the law is, how I think enforcers will interpret it, and what the law ought to be. Right now he’s limited to giving only one of those answers by virtue of his position.”