Lifetime Citizen Portal Access — AI Briefings, Alerts & Unlimited Follows
Lawmakers Demand Clear Rules for Crypto as SEC Faces Criticism for 'Regulation by Enforcement'
Loading...
Summary
Members pressed SEC commissioners for a statutory definition of digital assets and criticized the agency's enforcement-heavy approach; some urged passage of FIT21 or a stablecoin framework to provide clarity and guardrails for markets.
Members of the House Financial Services Committee spent a large portion of the hearing pressing the Securities and Exchange Commission and its commissioners on how the agency treats digital assets. The exchange centered on whether token sales are securities under the Supreme Court's Howey test and whether the SEC has used inconsistent terminology that creates regulatory uncertainty.
"Whether an investment contract is being offered and sold to the public...that's the Howey Test," SEC Chair Gary Gensler said in his testimony when explaining how the agency evaluates whether tokens meet the legal test for securities. Several members, including those who support legislative action, said that statutory clarity would help market participants and the agency alike.
Commissioner Hester Peirce testified that the SEC has used imprecise language that has left market participants uncertain and forced reliance on enforcement actions rather than clear rulemaking or guidance. "By using imprecise language, we've been able to sort of suggest that the token itself is a security...which has implications for secondary sales," Commissioner Peirce said. She added that the commission could and should provide greater clarity, including the use of exemptive relief and other staff guidance where appropriate.
Republican members repeatedly asked whether the SEC should defer to Congress for a statutory definition and whether bills such as FIT21 (market-structure and stablecoin-related legislation) could resolve the uncertainty. Democrats and some commissioners said the SEC can and should exercise its existing authority to address fraud and investor protection while welcoming congressional work on stablecoins.
Several members also raised the practical problem that some firms have tried repeatedly to register with the agency and received little substantive response, pointing to the need for a concrete registration pathway or a regulated sandbox for digital-asset firms. Commissioner Peirce and other witnesses said a sandbox or clearer registration path could help innovators comply without fear of unexpected enforcement risk.
The committee did not vote on legislation at the hearing; members urged continued bipartisan work in the coming weeks to produce statutory clarity.
