Judge Stephanos Bibas of the Third Circuit Court has expressed concerns over the U.S. Securities and Exchange Commission's (SEC) lack of clear guidance on cryptocurrency regulations, suggesting it raises constitutional issues regarding fair notice for regulated entities. This statement was made in a ruling filed on January 13.
"blockchain networks often reward participants with coins," said Bibas. "SEC to propose new rules addressing how and when digital assets qualify as securities subject to existing 12 securities laws."
According to Justia, the U.S. Court of Appeals for the Third Circuit, with a decision authored by Judge Bibas, reviewed Coinbase’s petition seeking regulatory guidance on digital assets, which had been declined by the SEC. During oral arguments on September 23, 2024, Coinbase contended that existing securities laws are insufficient to address the unique characteristics of cryptocurrencies. The court subsequently remanded the issue back to the SEC, instructing it to provide a more detailed explanation for its decision.
Social Capital Markets reports that in 2024, the SEC imposed $4.68 billion in crypto-related fines, marking a significant increase from $150.26 million in 2023. This surge was primarily due to a $4.5 billion settlement with Terraform Labs, one of the largest enforcement actions against cryptocurrencies to date. Since 2013, the SEC has collected over $7.42 billion in fines related to cryptocurrency activities, with 63% of this total occurring in 2024 alone.
Gary Gensler announced via his X account on November 21, 2024, that he will resign as chair of the SEC effective January 20, 2025. Gensler's tenure began in 2021 and focused on regulatory oversight and enforcement actions against cryptocurrency firms amid evolving financial markets.
The Federal Judicial Center (FJC) provides background on Judge Bibas: Born in Queens, New York in 1969, he graduated from Columbia University, University College Oxford, and Yale Law School before clerking for Justice Anthony M. Kennedy and Judge Patrick E. Higginbotham. Appointed by President Trump in 2017 to the U.S. Court of Appeals for the Third Circuit, Bibas previously served as a law professor at the University of Pennsylvania and was a founding member of the Quattrone Center for Fair Administration of Justice.
On Wednesday, Representatives Wiley Nickel and Ritchie Torres met with industry leaders to discuss the SEC's regulatory framework under Chairman Gensler. Torres recalled questioning Gensler about tokenizing a Pokémon card and described Gensler's response as showing insecurity about decentralization. Both Nickel and representatives from the crypto industry such as Robinhood's Dan Gallagher and former SEC employee Michael Liftik criticized what they termed "regulations by enforcement," arguing it negatively impacts consumers, innovation, and U.S competitiveness according to FXStreet.