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Ric Edelman, founder of Edelman Financial Engines

Regulation and Compliance > Federal Regulation > SEC

A Thank-You Note to Gary Gensler? You Bet.

By Ric Edelman

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What You Need to Know

  • I'm sure the SEC chairman and I aren’t done arguing, but the spot bitcoin ETFs' approval deserves applause.

For the last several years, I’ve criticized SEC Chairman Gary Gensler on my daily podcast The Truth About Your Future — mostly because of his stance on cryptocurrency and his years-long refusal to approve spot bitcoin exchange-traded funds.

And he deserves the criticism.

The Securities and Exchange Commission has refused to write regulations clarifying what is and is not permissible with crypto technology; instead, the SEC has relied on “regulation by enforcement,” fining companies for engaging in activities they didn’t know were prohibited. Gensler has withstood criticism from the financial media, Wall Street, the crypto community and even Congress (where a bill was introduced to fire him).

And for years, Gary Gensler rejected every application for spot bitcoin ETFs — a rather remarkable act considering that he approved of bitcoin futures ETFs.

If the SEC is OK with bitcoin futures ETFs, why isn’t it OK with spot bitcoin ETFs?

That’s like saying you can eat ketchup but not tomatoes — and the SEC’s illogical reasoning frustrated the crypto community. Ire got to the point that the SEC was finally sued over the matter, and last summer, in Grayscale v. SEC, the U.S. Court of Appeals for the D.C. Circuit ruled that the SEC had indeed acted “arbitrarily and capriciously” in rejecting Grayscale’s application for a spot bitcoin ETF. The court ordered the SEC to revisit its decision to reject the spot bitcoin ETF applications.

The crypto community grew excited in the ensuing months as it waited for the SEC to comply with the court’s order. And that’s what happened on Jan. 10: the SEC approved not just Grayscale’s application, but 10 additional applications as well.

In the few weeks since their debut, these ETFs have proven to be the most successful ETF launch in history, with billions of dollars flowing into them so far.

But the arrival of these ETFs was not a sure thing. SEC Chair Gary Gensler could have taken a different path following the court’s ruling. After all, he wasn’t ordered to approve the applications; the court merely ordered the SEC to “review” its decision to reject the Grayscale application.

Gensler could have appealed the court’s ruling, which would have delayed action for a year or more. Or the SEC could have required Grayscale to file a new application, which would have started a new 240-day clock.

Finally, Gensler could have taken the court literally: Since the court objected to the SEC’s rejection of spot ETFs following approval of the futures ETFs, the SEC could have pulled the futures ETFs off the market — essentially telling the crypto community that you’ll get neither instead of both.

But Gary Gensler chose not to pursue those paths. Instead, he followed the rule of law. And it is for this reason that I give him my praise, compliments and thanks.

America operates under the rule of law, and has since our independence in 1776. The rule of law separates us from most other countries — and if you need any evidence, just try driving in some of them.

Gary Gensler and I may disagree strongly with the court, but he recognizes the important of our nation’s checks-and-balances system. This democratic approach to government is what has made America the greatest country in the world.

The legislative branch writes laws; the executive branch can veto them, and the legislative branch can override the veto — and the judiciary can nullify laws that are unconstitutional. This system preserves our republic and our liberty. So although Gary Gensler strongly disagreed with the court, and has made clear he dislikes spot bitcoin ETFs (he warned investors against using them), he recognized that he isn’t above the court.

Thus, he complied with the order, and he approved the spot bitcoin ETF applications — all 11 of them. He may have done it while kicking and screaming, holding his breath and stomping his feet, but he did it.

In other words, Gary Gensler did what a statesman would do. And this is a cause for congratulations and celebrations.

Oh, I’m sure Gary and I aren’t done arguing. We don’t agree about the need for crypto regulation, for example. We’ll continue to disagree, but we’ll do so within the rule of law. It sometimes takes statesmanship to uphold that rule, and Gary Gensler just showed us what a statesman looks like.

Thank you, Gary Gensler.

Ric Edelman is an author and founder of the RIA Edelman Financial Engines (earlier Edelman Financial Services). He now leads the Digital Assets Council of Financial Professionals.

Pictured: Ric Edelman

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