Empire Newsletter: The SEC’s internal rift

Crypto gets political

In a new interview, Gary Gensler made no bones about his special focus on the crypto space, bristling at what he decried as excessive questions about his plans.

Those comments, as expected, drew widespread criticism across the crypto space. But there was also some dissent from inside the proverbial building, in the form of SEC Commissioner Mark Uyeda.

According to Fox Business’ Eleanor Terrett, Uyeda took issue with Gensler’s tack when it comes to crypto regulation.

“While the easiest regulatory response to crypto and digital asset innovation is to use bad actors as an excuse to ‘shut it all down,’ regulators should be creating a pathway to compliance for legitimate efforts,” Uyeda told Terrett. “The SEC has yet to develop that pathway.”

Sound familiar? Uyeda has been a consistent voice of dissent on what we might call the Gensler approach.

Uyeda was a supporter of spot bitcoin ETFs. He objected to the SEC’s denial of Coinbase’s request for rulemaking. He, alongside fellow Commissioner Hester Peirce in these instances, questioned the SEC’s approach to NFTs and called on the agency to answer questions of jurisdiction when it comes to tokenized digital art.

This is all to say that there appears to be a deep split within the SEC leadership. What’s more, it’s a split that comes as the agency wages legal war — or prepares to potentially do so — with some of the biggest names in the industry: Coinbase, Binance, Uniswap, Consensys and Kraken.

Gensler’s strategy has taken on more explicitly political dimensions in recent days — during a critical election season, no less.

The expression of dissent over Gensler’s crypto strategy reached the floor of Congress last night with the passage of a resolution that objects to SEC’s controversial crypto accounting guidance.

That joint resolution was the subject of a contentious House hearing one day earlier, as Blockworks’ Casey Wagner previously reported. The measure faces an uncertain future in the Senate and, more critically, President Joe Biden has promised to veto it should it reach his desk.

At least as far as Crypto Twitter is to be believed, opposition to the SEC — as well as Democrats like Sen. Elizabeth Warren, D-Mass., and Biden himself — has fueled support for former US president Donald Trump, who is seeking a second term this fall. The thinking seems to be that a Trump win means Gensler’s ejection from office and perhaps the ascent of more industry-friendly leadership.

Trump, for example, won an X poll hosted by CoinDesk that drew about 8,800 participants last week.

Trump appeared to throw his support behind crypto — or the American crypto industry, at least — during an event for holders of one of his NFT collections last night. Trump also touted his branded NFT products and said “I don’t like that investment” when asked about a Joe Biden-themed memecoin.

How serious Trump actually is — given that his business and political careers were defined by a propensity for telling people exactly what they want to hear — remains to be seen, as does the question of how crypto might factor into his second-term plans.

— Michael McSweeney

Data Center

BODEN is up 14%, according to CoinGecko, after former president Donald Trump was asked about it last night.
Meanwhile, the Doland Tremp memecoin is up 119% in the past 24 hours, per CoinGecko.
Bitcoin ETFs mostly reported flat flows on Wednesday (with the exception of Bitwise’s BITB, which brought in $11.5 million of inflows), per Farside data.
Bitcoin’s down to $61,000, though it bounced back after hitting $60,000 early Thursday morning.
Robinhood’s up 5% to nearly $19 a share in pre-market trading.

To the moon

I’m bringing Robinhood up again. But don’t worry, it’s not about the Wells notice this time.

An earnings report naturally sets the tone for the follow-up analyst call, which tends to occur a bit after the report itself is released.

When it’s a good report, the call’s tone tends to be more positive — that much was evident with Robinhood yesterday.

But Robinhood’s leaders struck a pretty bullish tone on the crypto side of the business, all things considered.

They definitely had a right to that bullishness, based on the numbers.

Robinhood’s crypto business helped to drive the company’s massive earnings beat that left Wall Street impressed. Crypto transactions made up $126 million in revenue last quarter, an increase of over 230%. Transaction-based revenue itself weighed in at $329 million.

Net revenues jumped to $618 million. To put the number in perspective, analysts expected $549 million.

Finally, the company reported that it held custody of $26 billion in customer crypto at the end of March — a 78% increase from the end of 2023.

Pretty impressive numbers, right?

Keep in mind that these figures were recorded after a massive bull run in the first quarter. We’re set to get April data from Robinhood next week, which’ll provide a better picture on how the current market is reflected in the business side of things.

Based on CFO Jason Warnick’s comments, I wouldn’t be surprised if the strength continued last month with maybe a slight dip.

One analyst asked if Robinhood would reconsider the coins it offers because of the Wells notice — yes, I know, we have to talk about it for a moment — due to Robinhood’s previous attempts to avoid the SEC’s ire.

The executives unsurprisingly didn’t address that directly, though Warnick reiterated that the company is “confident” it listed coins that met its standards.

CEO Vlad Tenev, in response to a question about volumes in March, noted: “But if our market share is growing throughout all conditions, then over the long run, we’ll do very, very well on that side of the business.”

Sounds pretty bullish to me.

— Katherine Ross

The Works

Binance, in late 2023, fired an investigator who uncovered a client manipulating markets, the Wall Street Journal reports.
VanEck launched its memecoin index on MarketVector, which tracks the top six memecoins.
JPMorgan analysts believe the SEC could establish a “middle category” for ETH, declaring that it’s neither a security or commodity, The Block reports.
The US House of Representatives voted to overturn the SEC’s Staff Accounting Bulletin 121.
Speaking of SAB 121, President Biden said he’ll veto the joint resolution if it hits his desk.

The Morning Riff

The back-and-forth between Binance and Nigeria took another turn this week after Binance CEO Richard Teng penned a blog post essentially accusing Nigeria of bribery.

Teng also called the country out for setting a “dangerous new precedent” by detaining an executive who visited the country with the intention of discussing the relationship between Binance and Nigeria (both the executive, Tigran Gambaryan, and Binance face tax evasion and money laundering charges now).

Yesterday, Nigeria denied the bribery allegation and called it an “act of blackmail” by Binance.

Meanwhile, Gambaryan sits in the Kuje correctional facility.

Binance has been notably quiet when asked by yours truly about updates to the Nigeria situation. But the blog post sheds some light on the lead-up to the executive detentions.

It’s undoubtedly a concerning situation. While the court proceedings appear to be moving along on paper, there’ve been so many changes at this point that it’s hard to keep the trials and hearings straight.

Keep an eye on May 17, at least until the next postponement is announced — currently, there are two trials and a hearing set to take place on the same day.

— Katherine Ross

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