SEC Democrat Warns of ‘Regulatory Jenga’ as Crypto Oversight Weakens

The US SEC Commissioner Caroline Crenshaw, the agency’s only remaining Democrat, criticized the SEC’s evolving stance on crypto regulation under the Trump administration.

Speaking at the SEC Speaks event on May 19, Crenshaw accused the Commission of dismantling essential safeguards and pursuing a course of “regulation by non-enforcement”—particularly in the crypto sector.

Crenshaw warned that the SEC’s framework, built over decades to protect markets and investors, is being gradually unraveled. “Market stability is like a Jenga tower,” she said. “Pull out too many pieces—especially without careful analysis—and the whole thing collapses.” 

Her remarks underscored a growing concern that recent moves to soften oversight, especially in the crypto industry, risk a systemic failure.

SEC Crypto Enforcement: A Quiet Retreat

Crenshaw pointed to what she views as an intentional scaling back of enforcement efforts in the crypto space. “I am deeply troubled by the Commission’s abandonment of swaths of our enforcement program,” she stated. 

According to her, the SEC has increasingly relied on informal staff guidance to effectively reverse established rules, sidestepping public comment and analysis. This has allowed certain crypto-related activities to continue under what she called a “wink and nod” regulatory posture.

Crenshaw also invoked the 2022 collapse of crypto exchange FTX as a reminder of the high stakes involved. “The risks that led to FTX’s downfall have not vanished,” she said. “Yet, serious calls for regulation have grown quieter. We’re setting ourselves up to repeat past mistakes, this time with deeper links to traditional finance.”

Republican Commissioners Back Lighter Crypto Touch

While Crenshaw voiced concern, the SEC’s Republican commissioners offered a markedly different view. SEC Chair Paul Atkins described the current regulatory climate as a long-overdue correction. “Crypto markets have been languishing in SEC limbo for years,” he said, urging the agency to stop stifling innovation.

Hester Peirce, head of the SEC’s Crypto Task Force, went further, asserting that “most currently existing crypto assets” do not fall under securities laws. She emphasized the need to move away from enforcement-driven policy. Commissioner Mark Uyeda echoed the sentiment, urging the Commission to abandon regulation by enforcement altogether.

The sharply contrasting views underscore the regulatory uncertainty facing the U.S. crypto sector—one that continues to straddle legal definitions, ideological divides, and unresolved policy debates.