During a recent congressional hearing, SEC Chair Gary Gensler faced pointed questions about the agency’s approach to cryptocurrency regulations. Representative Tom Emmer asked if Gensler believed that criticisms from some lawmakers were due to his perceived failure to establish clear rules over the past three years. Gensler suggested that laws are already on the books but agreed with Congress’s authority to alter them.
Democratic Representative Ritchie Torres also questioned Gensler’s definitions of securities. Torres used the New York Yankees ticket to ask if selling such a ticket could be a security Torres asked. He pointed out that the ticket would allow one to enter a game and wondered how the SEC has it that a ticket is a security.
Torres’ inquiries follow recent SEC actions against several firms, including Stoner Cats 2 LLC, which was charged with offering and selling NFTs without registering with the SEC in an offering that raised $8 million. He compared it to buying a ticket to a Yankees game and getting an NFT that gives you the right to access an animated web series.
Howey Test Cited as Key to Defining Crypto Assets
According to Gensler, offering an asset and selling it make it a security if the buyers are looking forward to making a profit based on the firm’s overall trade of that specific asset. He cited the Howey Test, a legal test created from a 1946 Supreme Court case that guides the definition of an investment medium.
Torres also noted that the profit expectancy could apply to many items, including collectables and other merchandise. He stated that if the promise of value appreciation holds for all, then how different assets such as NFTs and tickets will be governed is worth answering.
The hearing shows that legislators and agencies still disagree on addressing the constantly developing crypto environment. With the SEC on the lookout for regulatory violators, more people are asking for better rules in this uncertain world.
