SEC Republican Commissioners Criticize ShapeShift Settlement

Republican commissioners of the Securities and Exchange Commission criticized the agency’s most recent enforcement action, claiming that the settlement with ShapeShift “adds to the ambiguity” in the cryptocurrency market.

Hester Peirce and Mark Uyeda, commissioners of the SEC, stated in a statement on Wednesday, “The Commission’s enforcement action against ShapeShift is the latest installment in the serial drama of the Commission’s poorly conceived crypto policy.”

The crypto company ShapeShift was the target of a cease-and-desist order filed by the SEC on Tuesday for allegedly acting as an unregistered securities dealer. To evaluate if an asset qualifies as a security, the agency used the Howey Test, which is based on a 1946 U.S. Supreme Court judgment that the SEC routinely cites.

Peirce and Uyeda said that neither the explanation nor the list of 79 crypto assets that were classified as investment contracts were included in the SEC’s Tuesday order.

“This enforcement action underscores the adverse consequences of the Commission’s approach to regulation in the crypto space and adds to the ambiguity that hangs over the crypto world,” the commissioners stated.

The SEC’s enforcement strategy on cryptocurrencies has drawn criticism from the two Republican commissioners. The SEC has aggressively pursued legal measures against cryptocurrency companies in the recent several years, with prominent cases brought against Binance and Coinbase last year.

SEC Chair Gensler insists on crypto platform registration and deems many cryptocurrencies as securities. Industry seeks clarity for compliance and competitiveness amid regulatory uncertainties in the U.S.

The SEC’s “just come in and register” strategy was deemed “manifestly unsatisfactory” by Peirce and Uyeda. “The fiction that this has been done is undermined by the Commission’s failure to state which specific assets in the case before us are securities,” they stated.

They added, “The standards are so opaque and arbitrary that the Commission itself is unwilling to stand by its own analysis. If case-by-case determination is possible, we respectfully request that the Commission show its work.”