Democrats in the House declare Securities and Exchange Commission withholds critical data on cryptocurrency regulation legislation
Pouring Out the Tea: House Dems Slam SEC Over Crypto Analysis Snub
Here's the Scoop:
- Democratic House staffers are blasting the SEC for allegedly withholding key information about a crypto market structure bill.
- The SEC reportedly provided this critical analysis to Republicans but refused to hand it over to Democrats, according to House Democrats.
- The bill, known as the CLARITY Act, could have far-reaching implications that go beyond crypto, Democrats cautioned.
The No-BS Breakdown:
House Democrat staffers dropped some hot takes on the SEC Tuesday, accusing the agency of playing politics and shirking tradition by denying them crucial intel on the possible outcomes of a fresh crypto-oriented bill.
The SEC usually offers technical assistance (TA) to lawmakers when legislation could affect the agency's duties. These data-packed analyses, prepared by non-partisan SEC experts for both parties, help lawmakers grasp, in intricate detail, the bill's potential impact on the agency and financial markets.
Democrats on the House Financial Services Committee contend that the SEC has denied them these written analyses regarding a new crypto-focused bill. Simultaneously, in private, the SEC allegedly provides these comprehensive written TAs to Republicans.
Several Democratic staffers confirmed to reporters Tuesday that they were fully aware that their GOP counterparts had received concise, written TA on the CLARITY Act. This bill would create a regulatory framework for the U.S. crypto industry, revamp essential aspects of America's securities laws.
When the Democratic staffers sought this same comprehensive written TA from the SEC, they claim they were brushed off, with agency officials labeling the docs as "privileged."
An SEC spokesperson told Decrypt that the agency "provides technical assistance to any Member of Congress who seeks it, including on these crypto-related bills." The spokesperson did not respond promptly when asked to comment on the allegation that House Democrats requested written TA on the CLARITY Act and were denied it.
One Democrat staffer described the SEC's actions as a stark departure from the agency's tradition of offering written TA apolitically. "This is supposed to be completely non-political," the staffer asserted.
Democrats raised alarm about the SEC's reluctance to cooperate, given the CLARITY Act's potential to dramatically alter the SEC's regulatory role in financial markets. The bill is slated for a committee vote a week from today, on June 10.
A Republican spokesperson on the House Financial Services Committee did not respond to Decrypt's request for comment on the story.
Democratic staffers also claim that during a call with SEC staff, their questions about broader effects the bill could have on traditional securities markets were dismissed or not adequately addressed. According to one staffer, it felt like the SEC was attempting to "hide the ball."
House Financial Services Committee Ranking Member Maxine Waters (D-CA) intends to send a letter to SEC Chair Paul Atkins, demanding he send written analyses on the CLARITY Act's potential implications for both parties. This mirrors a previous move by former SEC chair Gary Gensler when a previous iteration of the bill, dubbed FIT21, was considered by the House last year.
"Given the significant implications this bill would have on the regulatory landscape for digital assets, investor protection, capital formation, market competition, and the SEC's ongoing regulatory efforts, a current and thorough analysis from the Commission is needed for informed policymaking," an unpublished copy of the letter seen by Decrypt reads.
Democrats fear that by carving out crypto from the SEC's oversight, the CLARITY Act could create sizable loopholes that enable traditional finance players to evade regulations if they adopt blockchain. That's one significant reason Democrats want the SEC's input on the CLARITY Act before it sees a committee vote as soon as next week.
"These [exemptions] could be creating loopholes based on technology," another Democratic staffer said. "Traditionally, the agency tries to be technology-neutral, so their rules won't become obsolete once the technology evolves."
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Will the ongoing tensions between parties significantly affect the CLARITY Act's chances of passage? Currently, all Republicans and a key group of pro-crypto Democrats on the House Financial Services Committee support the legislation.
While Democrats like Waters are unlikely to back the bill due to President Trump's continued involvement in personal crypto ventures from the White House, Democratic staffers suggest that these new issues with the SEC's cooperation could potentially impact support even among pro-crypto Democrats.
According to the staffers, it is impossible for them to fully grasp the bill's potential issues, loopholes, and areas for improvement without the shared feedback from the agencies, which they claim is being denied.
House Democrats are accusing the SEC of politicizing the CLARITY Act, a bill aimed at creating a regulatory framework for the U.S. crypto industry, by providing comprehensive written analysis to Republicans but denying the same to Democrats.
Democratic staffers claim that they were unable to receive the same detailed analysis as Republicans, with SEC officials labeling the documents as "privileged". This lack of information, they argue, could have far-reaching implications, going beyond just crypto.
In the ongoing tussle between the SEC and the House Financial Services Committee, House staffers are voicing concerns about potential loopholes in the CLARITY Act, especially those that could allow traditional finance players to evade regulations if they adopt blockchain technology.
A Democratic staffer described the SEC's actions as a departure from tradition, stating, "This is supposed to be completely non-political". They also intimated that the SEC was attempting to "hide the ball" by not providing adequate answers to their questions.
The ongoing stalemate between the SEC and Democrats could potentially impact the support for the CLARITY Act, even among pro-crypto Democrats, as they claim it is impossible for them to fully grasp the bill without shared feedback from the agencies.
House Financial Services Committee Ranking Member Maxine Waters intends to send a letter to SEC Chair Gary Gensler, demanding he send written analyses on the CLARITY Act's potential implications for both parties, mirroring a previous move by Gensler in 2020 when a previous iteration of the bill was considered by the House.
