The Blockchain Association is calling on SEC Chairman Gary Gensler to withdraw from regulatory proceedings, claiming he is showing “clear bias” against the industry.
Senior Counsel Marisa Coppel wrote today that Gensler’s statements proclaiming that all cryptocurrencies except Bitcoin are securities show that he is “prejudging the facts” without adequately assessing the evidence and data, going so far as to say: “Chairman Gensler’s goal is to make crypto illegal in America.”
She argued that this is made clear by the SEC’s recent enforcement action against an established crypto company like Coinbase, despite the industry’s repeated requests for guidance and clarity.
Coppel said the SEC has “given up its role as a regulator” and refused to give the industry the clarity it needs about securities laws and how they apply to various products and services within the industry. Instead, the regulator has chosen to go into “enforcement overdrive.”
She wrote:
“With such a clear bias and such disregard for basic due process principles, the agency cannot fairly oversee the digital asset industry.”
Violation of due process
Coppel argues that the SEC’s decision to initiate enforcement action against Coinbase demonstrates a violation of due process by Gary Gensler. This alleged violation relates to the so-called Wells process, which requires a company targeted by an enforcement action to be notified of the alleged violation and given an opportunity to respond to the allegations.
At the conclusion of the Wells trial, a vote by the SEC commissioners determines whether or not enforcement action will be taken. According to Coppel, it is essential that the supervisory directors do so without any appearance of bias when making this decision.
Nevertheless, Coppel claims that Gensler prematurely rated all cryptocurrencies, except Bitcoin, as securities. This, according to Coppel, suggests an inherent bias, which contradicts the obligation of impartiality in the decision to initiate an enforcement action against a company.
As such, she argued that he cannot take a neutral position when voting on whether the regulator should take enforcement action, and that in the Coinbase case, doing so was a violation of due process.
She wrote, “Chairman Gensler’s vote on whether to institute an enforcement action is tainted with bias.”
Coppel used the precedents set in cases such as American Cyanamid Co. v. FTC and Cinderella Career & Finishing Schs., Inc. v. FTC to strengthen its arguments against the SEC chairman. In both cases it was concluded that civil servants of temporary employment agencies should withdraw if they did anticipate the facts.
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