The end of Gary Gensler? He still has these 3 options

The past few months have not exactly gone well for the chairman of the U.S. Securities and Exchange Commission (SEC). Since the FTX scandal, Gary Gensler has been trying to crack down on the blockchain industry. He is suing one crypto company after another. But contrary to his hopes, it is becoming increasingly clear that many courts do not share his views and that the SEC's own leadership is distancing itself further and further from its chairman. What options does he have left?

The second major setback: After Ripple now Grayscale

In addition to the many smaller lawsuits filed by the US Securities and Exchange Commission against the crypto sector, the main focus was on two court decisions that severely damaged Gary Gensler's reputation. First, the lawsuit against Ripple, the issuer of XRP. The latter was accused by Gensler of issuing unregistered securities with its cryptocurrency. The court largely saw otherwise, and the industry celebrated this as a victory on points against U.S. authorities.

Also important is the damper the SEC received last week from a Washington appeals court. The SEC's blanket rejection of Grayscale's Bitcoin ETF application was wrong. Humiliatingly, the judge, Neomi Rao said, "Grayscale's rejection of the proposal was arbitrary and ill-considered because the commission failed to explain their different treatment of similar products."

SEC: An agency with image problems

Such an announcement is an embarrassing gossip for the otherwise powerful federal agency SEC. As chairman of the U.S. Securities and Exchange Commission, it is Gensler's responsibility to protect and not jeopardize the SEC's standing through ill-considered and politically driven waves of lawsuits.

By behaving more like a politician than an agency head, Gensler is increasingly sacrificing the image of his federal agency. After the FTX scandal, he tried to regain political credibility from his political supporters, especially Democrats, through his sheriff's behavior. The personal campaign is increasingly developing into a disaster for him.

Gensler's authority in jeopardy

Credible and trustworthy institutions are the foundation of any democracy and mandatory for entrepreneurship. The fact that the SEC rejects Bitcoin spot ETF applications, for example, with arguably flimsy reasons undermines that basic trust.

The fact that every deadline for accepting or rejecting Bitcoin spot ETF applications is now being extended has become a disgrace. Everyone knows that official deadlines are never met by the authorities.

Even parking tickets are soon to be securities?

If all you have is a hammer, all problems look like nails. This wisdom can also be applied to the U.S. Securities and Exchange Commission, which is only responsible when it comes to securities matters. As a result, to avoid losing power, Gary Gensler sees only securities everywhere, otherwise other federal agencies, such as the Commodity Futures Trading Commission (CFTC), claim jurisdiction.

For example, while Coinbase and the SEC are at odds, the crypto exchange could easily cooperate with the CFTC and get permission from them to trade futures, which also offends the SEC. This creates the impression that it is not always the fault of the allegedly dubious and incompetent crypto companies, but of an authority that is obstructive.

Recently, Genlser is also seeing effects in selected NFTs, as evidenced by the lawsuit against the media company Impact Theory. His obsession is creating more and more memes online that capitalize on his stock market obsession.

Gensler in the crossfire

Meanwhile, pressure is mounting from all sides. Many Republicans have been calling for his resignation for some time. The cost to the Biden administration of supporting Gensler continues to rise. At the same time, he has lost much support within his own circles.

That such open criticism is coming from the SEC leadership, even on the Web site of the U.S. Securities and Exchange Commission itself, shows how defeated Gensler now is. Commission chairs Hester Peirce and Mark T. Uyeda had criticized their own authority's judgment in the NFT case by Impact Theory.

Gary Gensler's three options

Gensler has maneuvered himself into an impasse. Stepping out on his own no longer works. There are too many lawsuits and uncompromising positions attached to his person for that. So there are three options:

1. The easiest option is to resign. The SEC could restart crypto-regulation and try to smooth things over and he would be out of the firing line. But then he would have to admit he lost to the crypto sector.

2. He will continue as before and go for profits. So if he succeeds in shackling the crypto sector and putting it under the full supervision of his agency, he can consider it a victory. As strongman of the SEC, he would have political support. However, this would also be over if the Republicans win the U.S. election next year. Should there be a change of government, Gensler would likely be removed from office.

3. He tries to change the image and seeks a face-saving solution. However, the attempt at a soft approach by being increasingly open to and constructive with the crypto-economy is hardly possible. The trenches are now too deep and his positions too entrenched.

Gensler vs. Crypto: A pointless battle

Meanwhile, not only the crypto industry and Republicans are against Gensler, but also more and more of his own employees and Wall Street. Taking action against YouTubers like Impact Theory is one thing, fighting BlackRock is another. The cost to the Biden administration of supporting him is now disproportionate under public pressure.

The stigmatization of the crypto-economy and submission to securities laws called for by Gensler are unrealistic. After all, this is not just one company, but an entire industry, a proprietary technology, against which Gensler is trying to gain the upper hand. Meanwhile, he must also realize that this borders on megalomania.