The SEC: Our Rules Could Be More Understandable
The crypto space is certainly no stranger to stories like this, and as of late, the agency appears to be very strict when it comes to exacting the appropriate penalties on crypto companies that don’t follow the rules and regulations in place.
However, the SEC is halting its charges short of fraud or anything larger given that legal figures with the SEC – such as Stephen Palley – fully admit that the agency needs to work harder to make its laws and legislation regarding initial coin offerings (ICOs) and other crypto practices much clearer.
According to Palley, the laws enforced by the SEC have several “gray areas” that crypto companies are often forced to interpret on their own. As a result, they often make incorrect decisions, which can lead to harsh circumstances for executives. Palley notes:
Clients are coming to us for conservative compliance advice. Enforcement has a long tail (Unikrn took place several years ago) and can take years to be made public, so we don’t know what is going on behind the scenes. As a practitioner in the trenches, I can tell you that our clients want more guidance to launch projects without fear of enforcement and there is a risk that this lack of clarity will stifle innovation by some and encourage imprudent fundraising by others. This doesn’t change the advice that we give – which is to stay on the right side of the law – but clearer guardrails would be welcome.
In a separate statement, SEC Commissioner Hester Peirce – referred to as the “Crypto Mom” – has expressed her opinions on Unikrn and the agency’s enforcement practices. She mentioned:
The determination of whether an instrument is offered and sold as a security in the form an investment contract requires a subjective weighing of the facts and circumstances. Such analysis, idiosyncratic by its very nature, does not produce clear guideposts for entrepreneurs and others to follow. The challenge of discerning a clear legal line is especially difficult with respect to new forms of business and novel technologies.
We Need to Make Things Clearer
She further states that while companies like Unikrn may be temporarily on the wrong side of the legal spectrum, she suggests that this may not necessarily be because the company is looking to commit any bad actions, but rather because it doesn’t know any better.
One of the biggest problems with the crypto space as of late is the lack of clarity regarding its rules. This has grown so massive in size that former presidential candidates Andrew Yang and Mike Bloomberg swore to make the rules much more readable and understandable if they won the White House.