Hester Peirce, a Commissioner at the U.S. Securities and Exchange Commission (SEC), has expressed her disappointment with the agency’s lack of predictability. In a speech, Peirce criticized the SEC’s enforcement actions against Library (LBRY) and ShapeShift, stating that they were driven by regulatory ambiguity.
Peirce highlighted that the recent crypto cases brought by the SEC seemed arbitrary and lacked predictability. In March, the SEC filed charges against ShapeShift, accusing the platform of trading crypto assets as securities. To settle the charges, ShapeShift agreed to pay a penalty of $275,000.
Peirce argued that ShapeShift’s legal troubles stemmed from the uncertainty surrounding how the SEC determines whether crypto assets are securities. She emphasized that even after a decade, it remains unclear how the Commission categorizes crypto assets as investment contracts. Peirce suggested that this ambiguity may be intentional on the part of the SEC.
LBRY faced a similar situation. The SEC filed a lawsuit against the company in 2021, alleging that it sold unregistered securities in the form of crypto assets. The court ruled in favor of the regulator, causing significant harm to LBRY’s business. Peirce noted that the company’s loss was not due to fraud but rather a failure to anticipate how the SEC would apply registration rules designed for traditional securities to a new type of business.
Peirce called on the SEC to establish a predictable regulatory framework to instill confidence in investors and encourage entrepreneurial innovation. She emphasized that while rules should adapt to market changes, predictability is crucial for a thriving entrepreneurial culture. Peirce suggested that any rule changes should be subject to adequate time for public discussion to assess their wisdom.
In conclusion, Peirce’s remarks underscore the need for clarity and consistency in SEC enforcement actions within the crypto industry. A predictable regulatory environment is essential to support investment and foster innovation.
