US Congressman Slams SEC for Overreach Against Robinhood

John Rose, US Representative from Tennessee's Sixth Congressional District, expresses strong opposition to the US Securities and Exchange Commission's (SEC) actions against Robinhood. In his latest post, Rose referred to the commission and its Chair, Gary Gensler, as "rogue regulators" in a post on his official X handle. He believes this federal agency has gone too far in its mandate to protect investors and maintain fair markets. Instead, Rose argues, the SEC should prioritize investor protection and avoid stifling innovation.

"The [SEC] has overstepped its boundary to protect investors and maintain fair, orderly markets by issuing a Wells notice to [Robinhood App], a precursor to enforcement action," the Congressman said.

"I'm honored to be at the forefront of these efforts to provide clarity by passing the FIT for the 21st Century Act and ensure rogue regulators like [Gary Gensler] are focused on the best interests of American investors and not willfully hindering innovation."

The SEC is facing criticism after issuing a warning of possible enforcement action against Robinhood's crypto division. Rose is one of many speaking out against the move. Jake Chervinsky, Chief Legal Officer at Variant, remarked, "The SEC has issued an unusually high number of Wells notices in recent months, but they're not always followed by enforcement actions." Chervinsky believes the SEC is abusing the Wells notice process, using it as a "scare tactic" to pressure companies.

"The number they've sent regarding crypto in recent months is astonishing. It's hard to imagine that they could bring so many enforcement actions at once," Chervinsky said.

"It seems like they are abusing the Wells process now as a scare tactic. If the SEC brings as many enforcement actions as it has sent Wells notices, it will be in flagrant violation of both the law and its Congressional mandate. If not, it's clearly abusing the Wells process to obtain free discovery and terrorize upstanding US companies."

Chervinsky added that the SEC is over-focusing on crypto regulation while neglecting its core job of regulating traditional equity and debt markets. He noted this emphasis is a misallocation of taxpayer resources that could be better used on the agency's primary responsibilities. "The SEC allocates a disproportionately high amount of its resources to crypto, given that its actual purpose is to regulate equity and debt markets. Every minute and taxpayer dollar spent on crypto is not spent on the real mission that Congress created the SEC to pursue."

Under the leadership of Chairman Gary Gensler, the SEC has been active in pursuing legal actions against prominent individuals and organizations within the industry. Beyond lawsuits against the three leading crypto exchanges—Coinbase, Kraken, and Binance—the SEC continues to expand its targets to include other crypto-related entities like Consensys, Uniswap Labs, and Robinhood. Ripple Labs, a prior major target of the SEC, has been one of the few entities to achieve a partial victory against the agency.