Mariya Mujahid
Associate Editor
Loyola University Chicago School of Law, JD 2026
The early October resignation of Gurbir Grewal, the Director of the Division of Enforcement at the U.S. Securities and Exchange Commission (SEC) sent ripples of (false) hope through the cryptocurrency industry. Grewal played a key role in shaping the SEC’s enforcement agenda; although his departure will likely not alter the SEC’s approach to digital assets, the upcoming election may affect the cryptocurrency industry’s interests.
Who is Gurbir Grewal?
Before joining the SEC in July 2021, Grewal served as New Jersey’s Attorney General, where he gained a reputation for cracking down on corporate misconduct and protecting consumers. His appointment to the SEC was seen as part of an aggressive move to reinforce the agency’s enforcement capabilities. Under Grewal’s leadership, the SEC intensified its scrutiny of the cryptocurrency space, following SEC Chair Gary Gensler’s calls for tougher regulation and enforcement to protect investors.
During his tenure, Grewal was deeply involved in high-profile cases related to fraudulent crypto-related matters. His leadership has often reflected a no-nonsense approach toward enforcing federal securities laws in the rapidly evolving digital asset market, and he “will go down as one of the most aggressive enforcement directors in SEC history.”
Succession
For some in the crypto community, Grewal’s departure might signify a potential pause or shift in the SEC’s rigorous enforcement agenda, potentially giving some breathing room to companies that are currently navigating regulatory uncertainty. On the other hand, those advocating for strong investor protections may worry that his exit could slow down necessary regulatory actions in the industry, leaving investors exposed to potential risks.
Within the past couple years, the SEC under Gary Gensler and Gurbir Grewal has focused heavily on enforcement to bring digital assets under the securities law framework.
Grewal’s resignation creates a vacuum in the SEC’s leadership at a time when the agency is facing increased pressure to define clear regulations for the cryptocurrency space. His successor, Sanjay Wadhwa, shows no signs of relenting, however. Wadhwa will likely be, at minimum, as aggressive as Grewal according to former SEC officials. Since all signs point to Wadhwa mirroring Grewal’s hardline approach, crypto companies can expect more fining and heavier enforcement and prosecution.
Where does this leave the cryptocurrency industry?
Many crypto firms are currently facing scrutiny from the SEC for a variety of alleged violations, including operating unregistered securities platforms, offering unregistered tokens, and engaging in deceptive practices. Grewal’s leadership has been instrumental in pushing forward these investigations, and it remains unclear whether his resignation will slow down or shift the focus of these cases.
Gurbir Grewal’s resignation will likely change little for cryptocurrency companies. Grewal is not only being replaced by someone equally, if not more aggressive, but the SEC as a whole is continuing to crack down on the digital assets industry. Critics of SEC chair, Gary Gensler, complain of his lack of clarity in regards to crypto guidelines. However, the waves of cases, along with many legal victories in those cases, continue as of the date of this article, with the SEC charging Cumberland with acting as an “unregistered dealer” in crypto markets as recently as October 10th, 2024.
All in all, this “crypto crackdown” while not entirely clear, is necessary. In an industry rife with allegations of corruption, convictions of fraud and money-laundering, and danger to investors, Gensler’s onslaught should be a welcome one. He will likely not be here to stay, however, as former president Donald Trump stated in a rally that he would fire Gensler on his first day in office, while Vice President Kamala Harris’s team has been vetting two candidates for his role.
With an election around the corner and donors from the cryptocurrency industry coming out of the woodwork, Vice President Kamala Harris seemed to walk back some tougher stances on the crypto industry, likely because of Donald Trump’s generous crypto platform. The former president even has his own crypto project, World Liberty Financial, and has made it clear that he opposes federal intervention in the crypto industry.
One significant step can be made before the election; the SEC should declare cryptocurrency as a security. Gensler has continued to dance around specifically declaring digital assets as a security, but doing so would provide more clarity to industry players and assist legislators with crafting regulations.