TD Cowen: Trump win could keep Gensler at SEC, delaying crypto regulation relief

Investing.com – Former President Donald Trump, who continues to tout himself as the pro-crypto candidate, has targeted US Securities and Exchange Commission Chair Gary Gensler, labeling him as the industry's biggest villain.

However, US investment bank TD Cowen speculates that Gensler could remain as a commissioner, potentially delaying expected regulatory relief for the crypto sector until late 2026.

Trump vowed to fire whom he called the American blockchain industry's No. 1 enemy in front of an enthusiastic crowd at this year's biggest Bitcoin conference. But there is no precedent for a president directly removing an SEC chair. 

Typically, SEC chairs step down when there is a change in the White House, allowing the new administration to appoint a new leader. 

"The Senate confirms SEC commissioners to five-year terms, which are staggered so that one term expires each June," TD Cowen noted. "No more than three of the five commissioners may be from the same party as the President." 

With Democrats currently holding a 3-2 majority and Gensler as chair, the firm points out that Commissioner Caroline Crenshaw’s term expired in June, but President Biden has nominated her for a second term. The nomination is expected to secure the Democratic majority beyond 2024.

If Trump wins, he won't be able to nominate a new SEC commissioner until June 2025, when Republican Hester Peirce’s term expires. Even then, TD Cowen notes, "This pick will not give the GOP a majority as Peirce is a Republican." 

"Trump could get that majority sooner if Gensler resigns, but nothing forces him to leave."

There is a possibility, TD Cowen suggests, that Gensler might remain as a commissioner to prevent the GOP from gaining a majority. 

"Democrats forced out the FDIC's GOP chair after the last election," TD Cowen analysts said in a note Tuesday. "We expect progressives to pressure Gensler to preserve Democratic policy wins by depriving the GOP of an SEC majority for at least 18 to 24 months."

If Gensler stays, the report suggests, crypto policy could be stalled. While enforcement actions might ease, adopting regulatory changes or settling existing legal cases could become challenging with a Democratic majority still in place. TD Cowen further speculates that Trump might attempt to fire Gensler, but "protections for commissioners are murky, and we believe this would get litigated."

TD Cowen concludes, "It is hard to see the point of having bipartisan commissions if presidents can fire the opposing party’s members for any reason."