The nation’s top securities regulator is backing down on crypto enforcement and climate disclosure initiatives as the agency is expected to take a more friendly and receptive approach to companies.
But not everyone at the Securities and Exchange Commission is on board with this change in priorities under the Trump administration.
When the S.E.C. announced last month that it would not be policing the sale of memecoins, Caroline Crenshaw, the lone Democratic commissioner at the S.E.C., quickly weighed in with a sharply different opinion about these novelty digital assets of often dubious value.
“This guidance is not a reasoned interpretation of existing law,” Ms. Crenshaw wrote in a statement. “It raises more questions than it answers.”
Ms. Crenshaw, who has worked at the S.E.C. for more than a decade, suddenly has become the agency’s loyal opposition. It’s a role that may not have an impact on the S.E.C.’s immediate rulings, but can help shape securities regulation over the long term.
Ms. Crenshaw’s dissenting view on the agency’s authority to regulate memecoins is the first of several contrary policy positions she has taken in the six weeks since Mark Uyeda, a Republican, became the acting chair of the S.E.C. She has taken issue with Mr. Uyeda’s overall hands-off approach to regulating crypto and his move to kill a newly enacted climate change disclosure rule for public companies.
Dissenting policy statements issued by Ms. Crenshaw don’t have the force of law. But they can be useful in staking out policy differences with colleagues, and the dissents are sometimes cited by private litigants in the courts.
“We have seen where commission dissents can make their way into court decisions,” said Tyler Gellasch, a former S.E.C. lawyer who runs the Healthy Markets Association, an organization that presses for greater securities regulation. “The job of a minority commissioner is to expose the areas where the agency has given short shrift to opposing views.”
Ms. Crenshaw, 42, became the lone Democratic commissioner at the S.E.C. after the former chair, Gary Gensler, and a commissioner, Jaime Lizárraga, resigned in January. Her term, which began in 2020, could run until the end of this year. When the Senate votes on Paul Atkins, the man President Trump has named to be the S.E.C.’s permanent chair, there will be three Republicans on the commission. A fifth seat is vacant, and it’s unclear if or when Mr. Trump will fill it.
“I hope to be a voice of common sense during this race to deregulate,” Ms. Crenshaw said in a recent interview. “Yes, businesses may see some cost savings, but at what price to investors and our markets?”
Before becoming a commissioner, Ms. Crenshaw cut her teeth working as a counsel to two former Democratic-leaning commissioners. After graduating from Harvard University, she got her law degree from the University of Minnesota. She has worked in private practice in Washington defending companies in securities law investigations. A native of the Washington area, she serves as a major in the Army Reserve Judge Advocate General’s Corps.
Until mid-January, when Mr. Trump was inaugurated, Ms. Crenshaw was in the majority on the commission and glad to follow Mr. Gensler’s lead. But now that has changed, with Mr. Uyeda making good on Mr. Trump’s pledge to rein in the regulator.
In keeping with that pledge, the S.E.C. under Mr. Uyeda announced a new rule on Monday that could make it harder for the agency to issue subpoenas as part of an investigation. The new rule says the decision to issue subpoenas will now require a vote of the commissioners, ending a policy, in place since 2009, that allowed the agency’s director of enforcement to take this step without the commission’s approval. Ms. Crenshaw voted against the rule change.
Already, Mr. Uyeda has cut the number of S.E.C. lawyers working on crypto enforcement cases. He dismissed two notable enforcement actions filed by the S.E.C. against crypto trading platforms, put a pause on litigation in two other crypto cases and shut down at least a half-dozen investigations.
In addition to trying to kill the climate change disclosure rule, the S.E.C. under Mr. Uyeda has said it will stop requiring brokers to report names, addresses and dates of birth about its customers to a national trading database. The database, called the consolidated audit trail, is used by the S.E.C. and other financial regulators to ferret out wrongful trading in the stock market.
At a conference last week sponsored by The Wall Street Journal, Mr. Uyeda said that the S.E.C. during Mr. Gensler’s tenure was “overly ambitious” and that regulation should be “very methodical.”
But critics have said the backpedaling by the commission, especially with regard to the trading database, would weaken investor protection and market transparency.
Ms. Crenshaw, in a policy statement, said the decision to remove personally identifying information about customers from the trading database would make it more difficult for the S.E.C. “to understand suspicious activity, unwind events or stave off market disruptions.”
In another dissenting opinion, she labeled the S.E.C.’s dismissal of its enforcement against Coinbase, the nation’s largest crypto exchange, a case of “regulatory whiplash.”
There’s a natural ebb and flow to regulation with changes in administration. But some worry that a less aggressive approach to financial regulation will roll back changes made after the 2008 financial crisis.
Dennis Kelleher, chief executive of Better Markets, a nonprofit that pushes for more transparency on Wall Street, said the S.E.C.’s guidance on memecoins “sends a horrible message” and leaves investors open to excessive risks.
The S.E.C. issued its hands-off guidance about regulating memecoins just weeks after Mr. Trump issued a memecoin, $TRUMP.
In taking on the role of the S.E.C.’s dissenter in chief, Ms. Crenshaw is taking a page from the playbook of her fellow commissioner Hester Peirce. Ms. Peirce, now part of the Republicans’ current two-seat majority on the commission, took on a prominent role during the Biden administration in arguing for more comprehensive and less adversarial approach toward regulating the crypto industry.
Ms. Peirce’s persistence in pointing out frequent policy statements where she differed with Mr. Gensler and his approach was rewarded when Mr. Uyeda tapped her to lead a new crypto task force that is supposed to create a regulatory framework that will protect investors without discouraging innovation.
Mr. Gellasch said Ms. Peirce had given Ms. Crenshaw a “road map as to how to be a vigorous and impactful dissenter.” Ms. Peirce was so forceful in taking issue with Mr. Gensler on how to regulate crypto that some in the industry affectionately referred to her as the “crypto mom.”
The push to roll back regulation at the S.E.C. may hasten once Mr. Atkins, an S.E.C. commissioner during former President George W. Bush’s administration, takes over as chair. Mr. Atkins, a pro-business Republican, has long opposed big fines for companies found to have violated securities laws and is a big proponent of crypto.
But until Mr. Atkins is confirmed, Ms. Crenshaw has some degree of leverage in dealing with her Republican colleagues. In order to have a quorum to take votes on approving settlements or regulations, Ms. Crenshaw must participate in commission meetings. Theoretically, she could refuse to show up to a meeting in order to prevent the commission from voting on a measure she found particularly objectionable.
For now, at least, that means Mr. Uyeda is limited in how aggressive he can be rolling back measures adopted under Mr. Gensler.
Beyond staking out policy differences, Ms. Crenshaw said, she wants to make a strong defense for the employees of the S.E.C. — especially as the Trump administration is moving to significantly reduce the federal work force.
“Federal civil servants of this country are decent, hard-working men and women,” she said. “These public servants deserve our gratitude for their everyday courage, but instead are being met with derision and scorn. They don’t deserve that.”
