Gary Gensler is perhaps the most consequential regulatory figure in cryptocurrency’s history — not because he helped the industry grow, but because his four-year SEC tenure as Chair (2021–2025) shaped the entire legal and business landscape of US crypto through aggressive enforcement action, landmark lawsuits, ETF approvals that came despite his opposition, and ultimately a legacy that the subsequent administration immediately reversed. Before becoming the industry’s primary adversary, Gensler was, oddly, one of the most crypto-literate regulators in government — having taught graduate-level courses on blockchain and cryptocurrency at MIT. The gap between his academic crypto engagement and his regulatory approach as SEC Chair was a persistent source of industry frustration.
Background and Career
Here’s how this developed over time.
Pre-SEC Career
Goldman Sachs (1979–1997): Gensler worked at Goldman Sachs for 18 years, becoming a partner in the merger and acquisitions departments. He is part of the generation of Wall Street veterans who went into government.
Treasury Department (1997–2001): Served as Assistant Secretary of the Treasury for Financial Markets, then Under Secretary for Domestic Finance under Robert Rubin and Lawrence Summers during the Clinton administration. He was reportedly involved in the decisions to not regulate derivatives (credit default swaps) — a regulatory gap that contributed to the 2008 financial crisis.
CFTC Chair (2009–2014): After the 2008 crisis exposed derivatives regulation failures, Gensler became CFTC Chair under Obama and pivoted to aggressive derivatives regulation, implementing Dodd-Frank Act provisions for OTC derivatives. He built a reputation as a tough but competent regulator of complex financial instruments — which shaped his approach to crypto when he later took that role.
MIT Media Lab (2018–2021): After CFTC, Gensler taught a course at MIT titled “Blockchain and Money” — 24 lectures available publicly on MIT OpenCourseWare. The course demonstrates sophisticated understanding of blockchain mechanics, DeFi, stablecoins, and the economics of token launches. Crypto advocates pointed to this knowledge base repeatedly as evidence that his enforcement approach was deliberate, not due to ignorance.
SEC Chairmanship
Appointed by President Biden in April 2021 — confirmed by a 53-45 partisan vote. Resigned January 20, 2025 (the day Trump was inaugurated).
Core Regulatory Theory: Most Tokens Are Securities
The regulatory landscape breaks down as follows.
The Howey Test Analysis
Gensler’s primary argument: Most crypto tokens satisfy the Howey Test criteria for being securities:
- Investment of money → ✓ (token purchases involve money)
- Common enterprise → ✓ (the blockchain platform)
- Reasonable expectation of profit → ✓ (most token buyers expect appreciation)
- Efforts of others → ✓ (the founding team develops the protocol)
From this analysis, Gensler concluded that the vast majority of crypto tokens — including ETH post-merge (CFTC disagreed), all DeFi governance tokens, exchange tokens (BNB), and most non-Bitcoin assets — were securities requiring registration with the SEC.
What he explicitly excluded from securities: Bitcoin. The rationale: Bitcoin is sufficiently decentralized that there is no identifiable “issuer” or “third party” whose efforts investors rely on.
His most controversial position: The “Ethereum question.” While the prior SEC chair had stated ETH was not a security, Gensler refused to commit to that view, creating uncertainty about whether ETH itself required securities registration.
Major Enforcement Actions
The following sections cover this in detail.
Coinbase (June 2023)
The SEC sued Coinbase — the largest US crypto exchange and a publicly listed company — for:
- Operating as an unregistered securities exchange
- Operating as an unregistered broker
- Operating as an unregistered clearing agency
- Unregistered staking-as-a-service offerings
The lawsuit was existential for Coinbase’s US business model. Coinbase fought back, arguing the SEC had no clear authority over crypto and had failed to provide workable rules. The legal battle dominated US crypto policy until the case was dropped by the new administration in 2025.
Binance and Changpeng Zhao (June 2023)
The SEC filed a sweeping lawsuit against Binance — the world’s largest crypto exchange — and its founder Changpeng Zhao personally. The complaint included 13 charges covering:
- Unregistered exchange operations
- Unregistered broker-dealer operations
- Commingling customer and company funds
- Manipulating trading volumes through Sigma Chain
- BNB as an unregistered security
- BUSD as an unregistered security
The DOJ separately prosecuted Zhao for Bank Secrecy Act violations; he pled guilty and was sentenced to 4 months in prison. The SEC case was also later settled/dropped under the new administration.
Kraken Staking ($30M Settlement, February 2023)
Before the larger exchange lawsuits, the SEC reached a $30 million settlement with Kraken — requiring Kraken to immediately shut down its US staking-as-a-service offering. This was controversial because:
- Many viewed staking as a fundamentally different activity from securities offerings
- The settlement took place without a court adjudicating the legal question
- It created a legal chilling effect on all US exchange staking products
Ripple Labs
The Ripple case (actually filed under the prior SEC Chair Jay Clayton in 2020) continued under Gensler and produced the most nuanced court ruling:
- Judge Analisa Torres ruled that XRP itself is NOT a security when sold programmatically to retail (exchange trades)
- BUT XRP sold to institutional investors in private placements WAS a security transaction
- Gensler appealed the retail-sale ruling; litigation continued
Terraform Labs and Do Kwon
The SEC also sued Do Kwon and Terraform Labs for the LUNA/UST collapse, arguing LUNA was an unregistered security. Kwon was later arrested and extradited.
Token Issuer Cases
Under Gensler, the SEC filed enforcement actions against dozens of smaller token projects, including:
- Nexo Capital
- Genesis Global Capital
- Gemini (Gemini Earn product)
- BlockFi ($100M settlement)
- Numerous smaller ICO-era projects
Spot Bitcoin ETF: Gensler’s Reluctant Approval
Despite Gensler’s aggressive enforcement stance, the SEC under his leadership ultimately approved spot Bitcoin ETFs in January 2024 — but not willingly:
- 2021–2023: SEC repeatedly denied Bitcoin ETF applications (Grayscale, ARK/21Shares, etc.) citing market manipulation concerns
- August 2023: DC Circuit Court of Appeals ruled the SEC’s Grayscale ETF denial was “arbitrary and capricious” — ordering the SEC to reconsider
- January 2024: SEC approved 11 spot Bitcoin ETFs simultaneously (BlackRock IBIT, Fidelity FBTC, Grayscale GBTC, Invesco, Bitwise, ARK/21Shares, etc.)
- Gensler issued a personal statement emphasizing he did NOT view the approval as an endorsement of Bitcoin and that most crypto remains securities
The ETF approval occurred because the court essentially forced the SEC’s hand — Gensler did not choose to approve it.
“Regulation by Enforcement” Criticism
The most consistent industry criticism: Gensler chose enforcement over rulemaking.
What critics argued:
- Instead of creating clear rules for how crypto companies could register with the SEC, Gensler sued companies for not registering under rules that arguably didn’t apply to them
- The SEC’s existing securities registration framework has no pathway for decentralized protocol registration
- Multiple federal courts found in the industry’s favor on various enforcement actions
- Commissioner Hester Peirce (“Crypto Mom”) repeatedly dissented from enforcement actions, arguing the SEC should provide workable rules first
What Gensler’s defenders argued:
- The Howey Test is a flexible standards-based framework that clearly applies to most tokens
- The SEC’s existing registration framework does have pathways for alternative trading systems
- Industry actors chose not to register because compliance would have constrained their business models
- Waiting for rulemaking would allow ongoing investor harm
Legacy: The Pendulum Swing
On January 20, 2025, Trump was inaugurated and Gensler resigned. The new SEC Chair Paul Atkins immediately:
- Dismissed the Coinbase lawsuit
- Dismissed multiple other pending enforcement actions
- Established a Crypto Task Force (led by Hester Peirce) to develop workable rules
- Approved Ethereum staking ETF products
Whether Gensler’s enforcement-first approach protected investors or primarily chilled innovation while pushing crypto activity offshore (to Binance’s international entities, to DeFi protocols) is a genuine ongoing regulatory debate without a clear resolution.
Related Terms
Sources
Scofield, C.L. (2023). The Howey Test and Digital Assets: A Critical Examination of the SEC’s Cryptocurrency Enforcement Framework. Yale Journal on Regulation, 40(2), pp. 681–720.
Kahan, M., & Rock, E.B. (2018). Crypto Governance and Securities Regulation. University of Pennsylvania Law Review, 167(1), pp. 115–198.
Brummer, C., & Yadav, Y. (2019). Fintech and the Innovation Trilemma. Georgetown Law Journal, 107(3), pp. 235–307.
Bullough, O. (2022). Butler to the World: The Book That Blew the Whistle on Britain’s Money Laundering. Profile Books.
Murray, T. (2025). From Enforcement to Clarity: The Post-Gensler SEC Crypto Pivot and Its Implications. SSRN Preprint.