Gensler says U.S. government shutdown would reduce SEC to skeleton crew

Gary Gensler, chair of the U.S. Securities and Exchange Commission (SEC), told Bloomberg on Sept. 20 that a government shutdown could hinder his agency.

Other reports indicate that the U.S. government could shut down on Oct. 1 as members may not pass the bills needed to fund operations before the next fiscal year.

Gensler commented on the situation, stating:

“The public should understand that we will largely be a skeletal staff … so the normal oversight we have on markets will not be possible .. for [however] many days [a shutdown] happens.”

Gensler said that, during a shutdown, the SEC would be unable to review filings from companies that aim to go public and other applications. He also said that the SEC might not be able to oversee markets if a significant event occurs, though he acknowledged that markets would likely continue to operate normally without the usual level of oversight.

Similar issues occurred in late 2018 and early 2019 when the U.S. government shut down for 35 days, which limited SEC operations and left it with a backlog.

Shutdown could affect SEC’s crypto activities

In light of Gensler’s statements, a government shutdown could affect various crypto-related regulatory decisions. Notably, the SEC is expected to make decisions on several Bitcoin spot ETFs in mid-October. Although the agency may postpone those decisions outside of a shutdown, a shutdown makes delays virtually certain.

Other cryptocurrency-related applications that might be scheduled for a decision outside of the shutdown period could also be delayed by a long-lasting backlog.

It is less clear how a shutdown might affect enforcement. Federal courts continued to operate during the last government shutdown. As such, high-profile SEC cases around Coinbase and Binance could continue as long as courts have sufficient funding set aside and as long as the SEC’s lawyers remain available. However, reduced staff could limit the SEC’s capacity to launch new investigations and lawsuits.

Incidentally, the possibility of reduced SEC operations comes just one day after another SEC member suggested that the agency could expand its enforcement efforts.

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