House Democrat staffers unloaded on the SEC Tuesday, accusing the agency of playing politics and defying precedent by denying them crucial information about the potential impact of a newly introduced crypto market structure bill.
The SEC routinely provides technical assistance, dubbed “TA,” to lawmakers when pending legislation could impact the agency’s functioning. This analysis, typically provided by apolitical SEC experts to members of both parties, helps lawmakers understand, at a granular level, the effect such bills could have on the agency and financial markets.
Democratic staffers on the House Financial Services Committee claim that in recent weeks, the SEC has deprived them of such written analysis pertaining to a new crypto-focused bill—while, in private, providing it to Republicans.
Multiple Democratic House staffers told reporters Tuesday they were personally aware that their Republican counterparts received detailed, written technical assistance from the SEC pertaining to the CLARITY Act, a bill that would create a framework for regulating the crypto industry in the United States and rewrite key portions of America’s foundational securities laws.
When Democratic staffers requested this same written analysis from the SEC, they say they were rebuffed, with agency officials calling the documents privileged.
In response, an SEC spokesperson told Decrypt that the agency “provides technical assistance to any Member of Congress who seeks it, including on these crypto-related bills.” The spokesperson did not immediately respond when asked to comment on the specific claims made by House Democrats that they requested written technical assistance on the CLARITY Act and were denied it.
“It’s a stark departure from how the agency has ever worked with respect to written technical assistance,” one Democratic staffer said of the SEC’s purported actions. “This is supposed to be completely apolitical.”
Democrats are particularly concerned about the perceived lack of cooperation from the SEC, given the massive impact the CLARITY Act would have in reshaping the agency’s role in regulating financial markets, and the speed with which Republicans are aiming to push the bill through the House. The CLARITY Act is set to be marked up in committee a week from today, on June 10.
A Republican spokesperson on the House Financial Services Committee also did not immediately respond to Decrypt’s request for comment on this story.
Democratic staffers further claim that on a call Thursday with SEC staff, their questions about knock-on effects the bill could have beyond crypto, on traditional securities markets, went either unanswered or not fully addressed—in a manner one staffer said “made it feel like they were trying to hide the ball.”
In part because of these events, House Financial Services Committee Ranking Member Maxine Waters (D-CA) plans to send a letter SEC Chair Paul Atkins, requesting he send both parties written analysis of the CLARITY Act’s potential impact—as former SEC chair Gary Gensler did when a previous iteration of the bill, dubbed FIT21, was considered by the House last year.
“Given the significant implications this bill would have on the regulatory landscape for digital assets, investor protection, capital formation, market competition, and the SEC’s ongoing regulatory efforts, a current and thorough analysis from the Commission is needed for informed policymaking,” an unpublished copy of the letter seen by Decrypt reads.
Democrats are growing increasingly concerned that, by carving out crypto from the SEC’s oversight, the CLARITY Act could create loopholes big enough for traditional finance players to slip through, too, so long as they adopt blockchain. That’s one major reason Democrats want to get the SEC’s input on the CLARITY Act before the bill sees a committee vote as soon as next week.
“These [exemptions] could be creating loopholes based on technology,” another Democratic staffer said. “Traditionally, the agency tries to be tech-neutral, so their rules won’t become obsolete once the tech evolves.”
Could these interparty tensions meaningfully impact the CLARITY Act’s chances of passage? Currently, all Republicans and a key contingent of pro-crypto Democrats on the House Financial Services Committee support the legislation.
While Democrats like Waters are unlikely to support the bill due to President Donald Trump’s continued involvement in personal crypto ventures from the White House, Democratic staffers say new issues with the SEC’s cooperation could potentially impact the support of the bill even among their pro-crypto colleagues.
“It is impossible for them to understand what this bill does, the loopholes that it has, where it needs to be fixed, and how it needs to be made stronger, without this feedback from the agencies,” one Democratic staffer said. “And we are being denied that feedback.”