The News
As the transition from the Biden presidency to the incoming Trump administration comes to a close, one of the country’s top financial watchdogs is in the spotlight.
In one of its last acts under US President Joe Biden, the Securities and Exchange Commission on Tuesday sued billionaire Elon Musk for failing to properly disclose shares he had amassed in Twitter before he ultimately bought the platform in 2022.
That lawsuit and other ongoing cases involving crypto present a political dilemma: Trump has criticized the agency’s approach under Biden, while Musk — tasked by the incoming president with recommending ways to cut the federal budget — has repeatedly complained about SEC overreach.
Incoming Trump-appointed chair Paul Atkins, seen as friendly to crypto and supportive of deregulation, now risks eroding the agency’s independence if he decides to drop these cases.
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Musk lawsuit poses questions as to SEC’s watchdog role
The SEC’s lawsuit seeks the unusual remedy of asking Musk to not just pay a fine, but to “pay back the windfall,” The New York Times’ DealBook newsletter noted. “That’s unusual,” one law expert told the Times, but it also sets up a “tough question” for Donald Trump’s SEC pick Paul Atkins — a respected figure among Wall Street insiders — as dropping the case could “call the bedrock principle of SEC independence into question.” Musk, meanwhile, is now in charge of recommending cuts to government spending, and has previously called for a “comprehensive overhaul” of the SEC that could see its watchdog and enforcement powers reduced.
Republican-led SEC likely to have more hands-off approach
Republican commissioners have criticized the SEC’s “enforcement-first” approach under the Biden administration, and the agency under Paul Atkins could shift toward a model that “provides more upfront guidance,” with enforcement as a last, rather than first, resort, according to Jones Day, a law analysis firm that has previously worked for Trump. Corporate penalties and disgorgement have reached record highs under outgoing Chair Gary Gensler, which Republican commissioners believe “drive out legitimate market participants and punish the wrong parties.” More broadly, SEC rules may be unclear and outdated, presenting an opportunity for more changes under Atkins.
Atkins likely to end crypto crackdown
The SEC brought forward at least 83 crypto-related enforcement actions against giants like Coinbase and Kraken under the Biden administration, arguing that the products are more akin to securities and thus should follow SEC rules. But under Donald Trump — who has dubbed himself the “crypto president” — Paul Atkins is expected to review these cases and potentially freeze some litigation, Reuters reported, and his allies are weighing creating guidance to clarify when the agency considers tokens to be a security. But reaching an agreement on crypto regulation is likely to take months or longer, Reuters reported, and dropping too many of the cases sets a “risky precedent” by further politicizing the enforcement process.