SEC vs Crypto: How Gary Gensler's Era Shaped the Industry

The Gensler Era: Regulation by Enforcement

If you want to understand where US crypto regulation is today, you have to understand what happened under Gary Gensler. The former SEC Chairman — who served from April 2021 through early 2025 — ran the most aggressive anti-crypto campaign in US regulatory history. And paradoxically, his approach may have ultimately strengthened the industry.

Let me walk you through the full story.

Gensler's Background

Here's the irony: Gary Gensler literally taught a course on blockchain and cryptocurrencies at MIT before becoming SEC Chair. He understood the technology deeply. But once in office, he took the position that virtually every cryptocurrency except Bitcoin was an unregistered security, and that crypto exchanges were operating illegally.

His famous line? "Come in and register." But as the industry repeatedly pointed out, the SEC provided no clear path for crypto firms to actually register, creating an impossible regulatory Catch-22.

The Major Enforcement Actions

Under Gensler, the SEC launched an unprecedented series of enforcement actions:

• Coinbase (June 2023): Sued for operating as an unregistered securities exchange, broker, and clearing agency. The SEC claimed multiple tokens listed on Coinbase were securities.
• Binance (June 2023): Charged with operating an unregistered exchange and 13 counts of securities law violations. Also personally charged CEO Changpeng Zhao.
• Ripple/XRP (ongoing from 2020): The SEC's case against Ripple became a landmark, with Judge Torres ruling in July 2023 that XRP was NOT a security when sold on exchanges — a major blow to the SEC's theory.
• Kraken: Settled for $30 million over its staking program.
• Multiple DeFi actions: The SEC went after Uniswap, various NFT projects, and DeFi protocols.

The ETF Rejection Saga

Perhaps the most consequential Gensler decision was his repeated rejection of spot Bitcoin ETF applications. From 2021 to 2023, the SEC rejected every single spot Bitcoin ETF application while simultaneously approving futures-based ETFs. The inconsistency was blatant.

It took Grayscale's lawsuit — where the DC Circuit Court ruled the SEC was being "arbitrary and capricious" — to finally force the approval. In January 2024, the SEC grudgingly approved 11 spot Bitcoin ETFs simultaneously. Gensler even released a statement essentially saying he disagreed with the approval but was following the court's mandate.

The Impact on the Industry

Gensler's war on crypto had several effects:

Effect	Description
Innovation Flight	Companies like Coinbase expanded to Dubai, EU, and other jurisdictions
Legal Precedent	Court rulings (Ripple, Grayscale) created favorable case law
Industry Unity	Crypto companies banded together for lobbying and legal defense
Political Mobilization	Crypto became a major political issue in the 2024 elections
Compliance Culture	Surviving companies invested heavily in compliance infrastructure

The Political Backlash

Gensler's approach backfired politically. The crypto industry mobilized massive political spending in the 2024 election cycle, with super PACs like Fairshake raising hundreds of millions. Pro-crypto candidates won across both parties, and crypto became one of the few truly bipartisan issues in American politics.

The result? A new administration that took office in January 2025 with an explicitly pro-crypto stance, promising to make America the "crypto capital of the world."

Lessons for Sri Lanka

The US experience offers valuable lessons for Sri Lanka and other developing nations:

1. Regulation by enforcement doesn't work. Clear, prospective rules are always better than retroactive lawsuits.
2. You can't stop Bitcoin. Despite years of regulatory hostility, Bitcoin thrived and institutional adoption accelerated.
3. Hostile regulation drives innovation elsewhere. Countries that create clear, fair frameworks attract crypto businesses and the jobs/tax revenue they bring.

Sri Lanka has an opportunity to learn from America's mistakes and create a forward-looking regulatory framework. In the meantime, understanding these global regulatory dynamics helps you make better decisions. Explore our learning center for more analysis, and stay updated on our blog.