Donald Trump, cryptocurrencies take aim at SEC as Biden allies sound alarm

Former U.S. President and Republican presidential candidate Donald Trump looks on during his campaign event, in Racine, Wisconsin, U.S., June 18, 2024.

Brendan McDermid | Reuters

On a cool, sunny June evening in San Francisco, the Pacific Heights home of venture capitalist David Sacks was the scene of a rare event in one of America's most progressive cities: a big-budget Republican political fundraiser.

The evening's guest of honor was former President Donald Trump, who delivered a formal speech from a closed stage to guests who had paid up to $300,000 to be there.

The Republican presidential candidate has promised to ease regulations on cryptocurrencies if elected in November and to “no longer stand in the way of innovation,” a person in the audience told CNBC. After his speech ended, Trump invited audience members to speak.

Stuart Alderoty, chief legal officer of blockchain giant Ripple, said the company has spent more than $100 million defending itself in litigation brought by the Securities and Exchange Commission.

Alderoty's comment was meant to serve as an example of how SEC regulatory actions under Chairman Gary Gensler have hampered his company and the industry as a whole, according to a guest and a person familiar with the situation, who were granted anonymity to describe a private meeting.

As Alderoty spoke, a second cryptocurrency industry executive whose company is also battling the SEC was in the audience: Paul Grewal, Coinbase's chief legal officer.

In 2020, before President Joe Biden took office, the SEC charged Ripple and its founders with violating securities laws by acting as unregistered brokers of digital currency tokens, which the SEC regulates as securities. In 2023, the regulator filed a similar complaint against Coinbase, the largest U.S. cryptocurrency exchange.

The proceedings are ongoing, and both companies have denied violating securities laws. Alderoty’s comments at the Trump fundraiser have not been previously reported, but he has made similar remarks elsewhere.

That frustration with Gensler’s regulatory agenda has taken a political turn this year, as cryptocurrency investors seek to wield more influence in Washington, D.C.

In recent months, Trump has capitalized on that frustration, going from skeptic to supporter of cryptocurrencies. Early signs suggest that the shift is winning him support from the small but vocal crypto community.

Some industry insiders who support Trump are going further than complaining about Gensler. Instead, they are trying to shape the agency in a possible future Trump administration, starting from the top.

In recent weeks, cryptocurrency investors have floated several names of potential SEC commissioner candidates if Trump is elected to a second term, according to three people familiar with the conversations.

Those names include two former chairs of the Commodity Futures Trading Commission during the Trump administration: J. Christopher Giancarlo and Heath Tarbert.

Christopher Giancarlo, former chairman of the U.S. Commodity Futures Trading Commission (CFTC), during a House of Representatives Committee on Agriculture hearing in Washington, DC, U.S., on Tuesday, June 6, 2023.

Ting Shen | Bloomberg | Getty Images

Another name that has been mentioned is Dan Gallagher, who served as SEC commissioner during Barack Obama's two terms and now works as general counsel for investment platform Robinhood.

Gallagher said he was honored to be put forward as a potential SEC chairman in a Trump administration.

“I have had the privilege of serving in various capacities at the SEC, including as a commissioner,” he said in a statement to CNBC.

“I care deeply about the agency, and I hope that any new SEC chairman will promote market access and ensure that the United States remains at the forefront of financial innovation,” he said.

In this June 14, 2011, file photo, Daniel Gallagher, nominee for commissioner of the Securities and Exchange Commission, listens during a Senate Banking Committee hearing on Capitol Hill in Washington.

Andrew Harrer | Bloomberg | Getty Images

The fourth name that has been mentioned to people close to Trump is Paul Atkins, according to three people familiar with the conversations.

As an SEC commissioner under former President George W. Bush, Atkins opposed the agency’s policy of imposing massive fines on companies that violated securities laws. He later played an influential role on Trump’s transition team in 2016, where he helped shape Trump’s lax approach to financial regulation.

“It’s chaos right now,” Atkins said of the SEC in an interview with CNBC. “I think there’s a lot of work to do. We need to change course.”

Atkins has not heard from Trump or his team about a possible position at the agency, he said. Asked whether he would take a job at the SEC if Trump wins, he said, “Who knows?”

If Trump is elected, SEC and crypto policy as a whole could potentially be shaped by more than just who chairs the commission.

According to data from OpenSecrets, at least 16 former Trump administration officials are now lobbying for the crypto industry.

If a new Trump administration were elected, they would likely be leading candidates for key positions at the SEC, the Commodity Futures Trading Commission and the Federal Trade Commission, all of which could exert influence over cryptocurrency regulation.

Biden allies sound the alarm

While the cryptocurrency industry may be pressuring Trump and Republicans to prepare for a possible SEC overhaul, cryptocurrency investors allied with Democrats need to be more careful in how they approach those in power.

Gensler was one of Biden's early appointees in 2021, and his approach to crypto helped set the tone for broader administration policy, despite the SEC's independence from the White House.

Over the past three years, Gensler has not let up in his criticism of digital currencies. In fact, it is harsher than ever.

“This is an area where the most influential people from a few years ago are either in jail, about to go to jail, or awaiting extradition,” Gensler said of cryptocurrencies in a recent interview with Bloomberg.

The idea that Biden is anti-crypto and Trump is pro-crypto has some Biden allies worried enough to take their case directly to senior White House officials, according to people familiar with the matter.

Venture capitalist John Doerr hosted a meeting at his Woodside, Calif., home on June 14 for White House chief of staff Jeff Zients.

According to a person with direct knowledge of the meeting, more than a dozen crypto enthusiasts were present to chat with Zients. Tech investor Ron Conway participated in the meeting.

Some guests spoke to Zients about Trump’s growing appeal to cryptocurrency holders. They attributed the surge in support in part to Gensler’s public statements and policies on cryptocurrencies, the person said.

The group argued to Zients that Gensler should not be the sole public face of the Biden administration's crypto policy because his remarks could lead cryptocurrency holders to support Trump over Biden.

An SEC spokesperson did not respond to a request for comment from CNBC.

John Doerr, senior partner at Kleiner Perkins Caufield & Byers, speaks at the TechCrunch Disrupt SF 2015 conference in San Francisco, Calif., on Tuesday, Sept. 22, 2015.

David Paul Morris | Bloomberg | Getty Images

Doerr and Conway have supported Democrats, including Biden, for more than a decade. Doerr hosted a fundraiser for Biden in February. Conway has donated $600,000 to the pro-Biden political action committee Future Forward, according to Federal Election Commission filings.

Doerr and Conway also both have investments in cryptocurrencies. Conway’s venture capital firm, SV Angel, includes Coinbase in its portfolio, while Doerr’s firm Kleiner Perkins has been investing in crypto companies for years, including recently participating in a $2 million funding round to back cryptocurrency data analytics startup Skew.

A White House spokeswoman defended the president's handling of cryptocurrencies and said administration officials are meeting with various stakeholders related to the industry.

“President Biden has launched the first-ever comprehensive approach to support innovation in digital assets while protecting consumers and investors from the risks associated with new technologies,” said White House Press Secretary Robyn Patterson.

The White House did not respond to warnings it received about its handling of the crypto industry or requests for further comment on Zients' meeting at Doerr's home.

Conway and Doerr did not respond to requests for comment.

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