SEC Democratic Seats at Risk as Crypto Groups Scuttle Biden Pick

A key US financial regulator is bracing for an unprecedented political shift under the incoming Trump administration after the cryptocurrency industry successfully lobbied against President Joe Biden’s attempt to renew a Democratic commissioner’s term.

Crypto heavyweights including the Blockchain Association, DeFi Education Fund, and Cedar Innovation Foundation made a concerted bid to block the Senate’s confirmation of Caroline Crenshaw at the Securities and Exchange Commission, citing her support for the Biden administration’s crypto regulatory and enforcement efforts.

The SEC is now poised to move ahead without any Democratic commissioners owing partly to the crypto groups’ anti-Crenshaw push, which outgoing Senate Banking Committee Chairman Sherrod Brown (D-Ohio) described as a “disgusting smear campaign” after the panel scrapped a vote on her nomination last month.

President-elect Donald Trump’s pick for SEC chair, Republican and former commissioner Paul Atkins, is expected to helm the agency with a decidedly lighter touch on crypto, climate disclosures, and other issues—a change that would be eased by an all-GOP commission. Trump could simply name Atkins to replace Crenshaw, whose term expired last year.

The “reality of a bipartisan SEC” is at stake without a vote to confirm Crenshaw, more than 40 labor and civil society groups warned last month, citing the Trump administration’s potential to break from tradition that involves the opposition party selecting candidates for two commissioner seats.

“If that occurs, we face the possibility that those seats will be vacant meaning, because of five-year terms, the SEC may be controlled by Trump appointees past the next presidential election,” the pro-Crenshaw advocacy groups said in their letter to the Senate.

The statutory language that dictates the SEC’s makeup says no more than three of the five members leading the commission can be from the same party, but it doesn’t specify a party for the two remaining candidates.

“Can you theoretically have three Republicans and two independents? That’s not the norm, but for someone to say that President Trump is a norm-breaker is not going out on a limb,” said David Zaslowsky, a partner at Baker McKenzie who has worked on cases involving blockchain technology.

The SEC didn’t respond to a request for comment.

Crypto Campaign

The DeFi Education Fund and Blockchain Association stood against Crenshaw’s nomination based on her vocal dissent to the approval of an exchange-traded fund tied to Bitcoin. A federal appeals court had previously ruled that the SEC’s initial rejection of the product was arbitrary and capricious.

“Commissioner Crenshaw, in her dissenting statement on the approval of the spot BTC ETP, rejected the findings of the DC Circuit Court and continued to defend the SEC’s ‘unlawful’ position,” the pro-crypto groups said in a letter to Senate Banking Committee leaders. “The Senate should reject the failed policies of the past instead of advancing a nomination that will potentially stifle the growth and integration of blockchain-based innovations in our economy.”

Both industry groups are plaintiffs in federal litigation against the SEC over its handling of digital assets.

The Cedar Innovation Foundation’s digital advertising campaign framed Crenshaw as “even more extreme than Gensler,” urging lawmakers last month to vote against her renomination.

The Senate Banking Committee ultimately canceled its vote that had been slated for Dec. 18, leaving the renomination question unanswered as the legislative session drew to a close.

“Why not give President Trump an opportunity to put pro-common-sense people on the SEC and not lock in someone who isn’t just adversarial to the industry, but adversarial to the rule of law?” Sen. Tim Scott (R-S.C.), who is set to take over as Banking Committee chairman, said at the Blockchain Association’s policy summit last month.

Block the Vote

The Banking Committee’s choice to abandon its vote on Crenshaw leaves all three Democratic commissioners likely headed to an off-ramp, with Chair Gary Gensler and Commissioner Jaime Lizárraga having announced their intentions to step down by Inauguration Day on Jan. 20. Even if the panel had voted in favor of Crenshaw, her odds of confirmation by the full Senate weren’t guaranteed.

“I didn’t hear Senators Elizabeth Warren or Chuck Schumer pushing hard for this nomination,” Dina Ellis Rochkind, counsel at Paul Hastings LLP, said last month.

It’s possible Schumer, the outgoing Senate Majority Leader, didn’t want someone “who the industry thinks is anti-crypto from day one,” said Ellis Rochkind, who advises clients on crypto and blockchain technologies.

That’s a notable turnaround since 2020, when Trump in his first term nominated Crenshaw to serve as a Democratic commissioner and the Senate confirmed her by voice vote.

Democrats led by Sen. Elizabeth Warren (D-Mass.), set to be ranking member on the Banking Committee, could make an effort in the new Congress to complicate the confirmation process for Atkins.

It’s also possible the Senate will ultimately vote on Trump’s pick for SEC chair packaged with a yet-to-be-named Democratic nominee for commissioner, according to Ellis Rochkind.

“They just didn’t care for this particular Democrat and what she had done in her term on the Commission,” Zaslowsky said. “It should be that the SEC does what Congress legislates, so that you have an SEC that is not anti-crypto working with a Congress that is not anti-crypto to come up with reasonable regulation of the crypto industry.”