Kate Rice
Associate Editor
Loyola University Chicago School of Law, JD 2026
With the return of the Trump Administration looming large, rumors of possible regulatory appointments are already swirling. One federal agency that will undoubtedly see major changes with the transition of power is the Securities and Exchange Commission (SEC), the authority responsible for regulating the securities market and protecting investors. With the shift in presidential administration coupled with significant GOP gains in the House and Senate, analysts have begun to speculate on how agency leadership and staffing changes will impact securities policy and rulemaking, and what the rest of the country can expect from the markets over the next four years.
New SEC Leadership
President-Elect Trump has made his disdain for current SEC Chairman Gray Gensler clear, even making a pledge during his campaign to fire Gensler “on day one.” However, while voters may get excited about the prospect of immediately ousting Gensler, the process of reinstating a new SEC chair involves several procedural and political hurdles concerning due process and the legal safeguards in place.
Under the 1935 landmark case Humphrey’s Executor v. United States, the president is limited in his or her ability to remove commissioners of independent agencies without cause. The process for firing an official “for cause” requires the president to justify the removal of that agency official on a legitimate basis, such as inefficiency, neglect of duty, or malfeasance in office. If Trump wants to remove Gensler before his term expires in 2026 and cannot prove these types of behavior, Gensler could request a federal judge reinstate him under judicial review. Moreover, while congressional approval is not required for the SEC chair, the advice and consent of the Senate is considered, and there will likely be congressional pushback to any abrupt agency leadership changes.
That being said, many have argued that grounds for Gensler’s removal exist, like Sen. Warren Davidson (R-OH), who pointed to Gensler’s handling of the SEC’s legal battles (the Ripple case, sanctioning of SEC lawyers, etc.). If Trump can show that Gensler’s behavior meets the “for cause” removal standards and secures congressional support, the removal process itself can still take months. But it’s unlikely that Gensler will put up a fight; in response to Trump’s pledge to remove him from office, he said, ” We’re going to continue to do that which we do well at the SEC until . . . the ref calls the whistle. Traditionally, presidents decide who chairs the SEC. That’s a good part of democracy.”
Trump’s transition team has floated several possible names for Gensler’s replacement. Among those on the shortlist is Dan Gallagher, who served as an SEC Commissioner from 2011 to 2015 and is currently chief legal and compliance officer at Robinhood, as well as Robert Stebbins, partner at Willkie Farr & Gallagher who served as SEC general counsel in Trump’s first administration.
It’s important to note that while Gensler may attempt to push forward as many rules and regulations as possible through the remainder of President Biden’s term, Chapter 8 of the Congressional Review Act (CRA) grants Congress the authority to overturn regulations passed in the last portion of a previous administration. With Republicans now in control of both chambers of Congress, leaning on the CRA to kill these last-ditch rules will be an effective tool in Republicans’ arsenal.
Regulatory Pivots
Under Gensler’s reign, the SEC dramatically increased the scope of regulation in the corporate sector. During his term, the agency adopted over 40 final rules, with about a dozen proposed rules still pending. Trump’s SEC will seek to undo this, with priorities dependent on who is put in charge. Regardless, a Republican chairperson will favor loosening the regulations that Gensler has advanced since 2021. Jennifer Klass, a partner at K&L Gates said, “While the issues of what’s in the best interest of an investor will continue to be important, we won’t see as much energy put behind trying to expand those obligations beyond the regulatory frameworks that already exist.”
There are several areas that will likely see regulatory change with the shift in SEC leadership. Crypto is a major priority for Trump; with several crypto business ventures of his own, he has voiced his desire to make America the “crypto capital of the planet” and the Bitcoin “superpower of the world.” He has made numerous promises regarding digital assets, like instating a “strategic national bitcoin stockpile” that legitimizes bitcoin as a reserve asset. He has also promised to block a Fed-issued digital currency that could exclude competitors from the market. Additionally, there has been an ongoing debate at the SEC over whether cryptocurrencies are securities; Gensler believes they are. Trump’s SEC will likely address whether crypto qualifies as securities, which would clarify significant regulatory uncertainty.
Many proposals currently being pushed by Gensler will be abandoned completely, like reforms to how Wall Street handles stock trades or updated proxy advisory firm restrictions. Perhaps the most controversial initiative at risk are proposed enhanced disclosures for climate-related risks. The SEC, after voting in favor of the rule, soon put it on hold following a May 2024 court order after an industry lobby group sued over the requirement that hedge funds report on short positions and stocks lent for short selling. Should this litigation result in an adverse court decision, many predict that the SEC under Trump’s leadership would not appeal, as this would help in dismantling the rules altogether.
The new Administration will also likely roll back many of the regulations passed under Gensler. In addition to scaling back corporate disclosure requirements, registration and short-sale rules for hedge funds are also on the chopping block. However, undoing active SEC regulations is a long and arduous process analogous to the rulemaking process, sometimes lasting years. But coupled with the strategy of abandoning litigation over regulations and leaning on Congress to undo rules, there is a lot that can be undone in four years.
Looking to January
Many of the promises and proposals that Trump touted throughout his campaign are still in the distant future, subject to due process. While this remains an important check on the speed of advancing or dismantling regulatory agendas, there need to be other devices in place to inform the process when one party is in complete control. Mandatory public comment periods or expanded congressional approvals could be ways to effectively involve more voices in these highly consequential decisions. The next few months will be crucial in discerning Trump’s administrative agenda regarding securities regulation. Regardless, as D.C. transitions to a GOP trifecta, the country should prepare for major regulatory changes to come.