SEC Chair Gensler Agrees With Predecessor: ‘Every ICO Is a Security’

SEC Chair Gensler Agrees With Predecessor: ‘Every ICO Is a Security’

Securities and Exchange Commission (SEC) Chair Gary Gensler believes the vast majority of crypto tokens and initial coin offerings (ICOs) violate U.S. securities laws.

In a speech at the Aspen Security Forum on Tuesday, Gensler said he agreed with his predecessor, former SEC Chair Jay Clayton, who once famously said that in his view, “every ICO I’ve seen is a security.” Gensler said he agreed with this view.

“Generally, folks buying these tokens are anticipating profits, and there’s a small group of entrepreneurs and technologists standing up and nurturing the projects,” Gensler said in prepared remarks. “I believe we have a crypto market now where many tokens may be unregistered securities, without required disclosures or market oversight.”

These tokens may allow markets to be manipulated which in turn could harm investors, the regulator said.

Gensler reiterated earlier comments that stock tokens and “stable value tokens backed by securities” qualify as securities in his view, meaning they must be registered and their issuers must abide by existing federal law.

“A typical trading platform has more than 50 tokens on it. In fact, many have well in excess of 100 tokens. While each token’s legal status depends on its own facts and circumstances, the probability is quite remote that, with 50 or 100 tokens, any given platform has zero securities,” Gensler said.

Gensler briefly hinted at how his agency might approach exchange-traded funds (ETFs) as well during his speech. More than a dozen industry participants have filed applications to launch a bitcoin ETF over the past year.

Gensler said investment vehicles with exposure to crypto already exist, including mutual funds. While Gensler didn’t comment on the proposals themselves, he called out the importance of investor protections codified into law in a brief discussion of the issue.

“Given these important protections, I look forward to the staff’s review of such filings, particularly if those are limited to these CME-traded bitcoin futures,” he said.