Gary Gensler associates cryptocurrency with cash in widely shared 2018 video — Reactions from Crypto Twitter

The cryptocurrency community is highlighting the inconsistency of Gary Gensler, the leader of the United States securities regulator, following the resurfacing of a 2018 video in which he asserted that cryptocurrencies are equivalent to commodities or cash and do not qualify as securities.

This video originates from a “Blockchain and Money” course offered in the Fall Semester of 2018, which was taught by Gensler, a former educator at the Massachusetts Institute of Technology (MIT) prior to his appointment as chair of the Securities and Exchange Commission (SEC).

Regarding initial coin offerings (ICOs), Gensler remarked that “three-quarters of the market are not ICOs or do not fit the definition of securities,” identifying the U.S., Canadian, and Taiwanese markets as the “three jurisdictions that adhere to something akin to the Howey Test.”

“Three-quarters of the market is non-securities; it’s merely a commodity, cash, crypto,” Gensler stated subsequently.

The following clip is from a Fall 2018 Graduate MIT course titled “Blockchain and Money”
Gary Gensler – the current SEC Chair, served as the professor.
The inconsistency is evident
“So we already know in the US and in many other jurisdictions that 3/4 of the market… pic.twitter.com/rjRWeq5P8X

— zk- (@ZK_shark) April 25, 2023

Although Gensler briefly recognized that ICOs might ignite a securities discussion, he concluded that “three-quarters of the market is not particularly significant from a legal standpoint.”

Numerous members of the cryptocurrency community expressed their astonishment at Gensler’s comments.

Coinbase CEO Brian Armstrong simply replied with “Wow” to an April 26 Twitter post shared by cryptocurrency researcher “zk-SHARK.”

Wow https://t.co/gQZ7pRWacM

— Brian Armstrong ️ (@brian_armstrong) April 26, 2023

Erik Voorhees, the founder of the crypto trading platform ShapeShift, inquired “When does someone get arrested for fraud?” in an April 25 Twitter post to his 658,900 followers.

When does someone get arrested for fraud? https://t.co/5BtU2sT5x2

— Erik Voorhees (@ErikVoorhees) April 25, 2023

Farokh Sarmad, the founder of the Web3 podcast Rug Radio, referred to Gensler as “disgusting” in a tweet to his 346,200 followers, while a systems engineer known as “JD” urged the SEC Chair to clarify the shift in his perspective.

However, not everyone agreed on the matter.

Related: Gary Gensler declines to clarify if ETH is a security: SEC hearing

U.S. attorney Preston Byrne noted that professors and law enforcement officials operate in “different capacities” and suggested that Gensler should not be held accountable for the same views he expressed previously.

I see many individuals criticizing Gary Gensler over this, but it’s crucial to recognize the different roles in which he is speaking. As a professor, he can discuss what things are in the abstract. As a law enforcer, he is obligated to uphold the laws as they exist. https://t.co/mYhd7Hm8I9

— Preston Byrne (@prestonjbyrne) April 26, 2023

Another U.S. attorney, Jonathan Schmalfeld, who focuses on blockchain technology, contested Byrne’s viewpoint by asserting that Gensler’s understanding of the Howey Test should not vary based on his role. This prompted a further clarification from Byrne:

“When I consult with clients about these matters, there are three perspectives: what I believe the law is, how I think enforcers will interpret it, and what the law should be. Currently, he is restricted to providing only one of those perspectives due to his position.”

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