Weekly Roundup

CAT Funding Scrutiny – Litigation Against SEC from ASA: Citadel and the American Securities Association filed a lawsuit in the 11th Circuit this week challenging the SEC’s regulatory ability to fund the Consolidated Audit Trail. The suit is anticipated to contest adherence to the Administrative Procedures Act. Already, the 2023 budget for the CAT is larger than half of federal agencies, and approaching agency-like size and scope, but without the Congressional oversight of an agency.

Peirce’s “Fears for Tiers” Dissent: During this week’s SEC Open Meeting, the agency commissioners voted 3-2 along party lines to release for public comment a proposal entitled the “Prohibition on Volume-Based Exchange Transaction Pricing for NMS Stocks.” In her published dissenting opinion, SEC Commissioner Heather Peircenoted the benefit of cost savings of bulk orders, and highlighted the “value of sequencing proposals.” For public comment, several alternative proposals included at the end of the proposal would expand the ban beyond agency orders to proprietary orders, or alternatively impose a heightened transparency/disclosure regime without a ban on volume-based exchange transaction pricing.

2024 SEC Priorities: The SEC’s Division of Examinations unveiled its departmental priorities for 2024, highlighting their upcoming efforts to more thoroughly scrutinize crypto practices, products, and services. While supporters claim the division’s work is critical to reducing the risk digital assets pose to investors and U.S. capital markets, numerous industry experts have noted the announcement further signals the lengths to which SEC Chairman Gary Gensler is willing to go to reign in the industry.  

Hamas-Cryptocurrency Concerns: The U.S. Treasury Department’s Office of Foreign Assets Control imposed sanctions this week on Hamas linked crypto operators. This comes after a group of bipartisan lawmakers, led by U.S. Senators Elizabeth Warren (D-MA), Roger Marshall (R-KS), and U.S. Representative Sean Casten (D-IL), called on the Biden administration to take steps to cut off cryptocurrency usage by Hamas.

Crypto Firms Fraud Scheme: New York Attorney General Lettia James’ (D-NY) office is suing Gemini Trust, Genesis Capital, and Digital Currency Group for allegedly lying to investors and intentionally hiding their losses. The lawsuit specifically claims that Genesis and Digital Currency Group attempted to conceal over $1 billion in Genesis’ losses from Gemini Earn investors and the public.

In the Mix: This Week’s Top FinTech Thought Leader

  • SEC Chair Gary Gensler, spoke with the Financial Times about his fears of a “nearly unavoidable,” financial crisis due to AI’s potential to undermine financial stability. “I’ve raised this at the Financial Stability Board. I’ve raised it at the Financial Stability Oversight Council. I think it’s really a cross-regulatory challenge,” said Gensler.

  • Chair Ann Wagner (R-MO), Capital Markets Subcommittee, prioritized further SEC oversight amid GOP leadership uncertainty, and scheduled a hearing next Tuesday to examine the SEC’s current slate of regulatory initiatives.  The hearing is entitled “Examining the SEC’s Agenda: Unintended Consequences for U.S. Capital Markets and Investors.”

  • James Angel, associate professor at Georgetown University’s McDonough School of Business, noted the upcoming Financial Markets Quality Conference.