Is the SEC About to Get a Crypto-Friendly Makeover with Dan Gallagher at the Helm?

How would his approach differ from Gensler’s crackdown?

Crypto’s Robinhood in the Making?

Rumors are swirling that Dan Gallagher, Robinhood’s Chief Legal Officer and a former U.S. Securities and Exchange Commission commissioner, may be tapped to lead the SEC if Donald Trump wins the 2024 election. Gallagher’s name emerges at a time when tensions between the SEC and the crypto industry are already at an all-time high. Under the leadership of SEC Chair Gary Gensler, the SEC has been cracking down on crypto exchanges like Coinbase, Kraken, and Binance, arguing that many cryptocurrencies should be classified as securities.

In recent months, Robinhood’s crypto division has found itself in the SEC’s crosshairs, receiving a Wells Notice in May — an indicator that charges could be forthcoming. Not just Robinhood, but OpenSea, the largest non-fungible tokens marketplace, also received a Wells Notice from the SEC in August, alleging that certain NFTs on the platform may be classified as securities — a claim that could have serious repercussions for the entire NFT space.

Meanwhile, the crypto industry argues that the current SEC framework doesn’t fit digital assets, creating a regulatory headache for companies trying to comply. If Gallagher does step into the chair position, his background in both traditional finance and digital assets could offer a new approach to regulating the evolving crypto market.

But what exactly does this mean for the future of the industry? Let’s dive deeper into what a Gallagher-led SEC might look like and how it could shape the crypto space.

Who is Dan Gallagher?

Dan Gallagher’s career in financial regulation is both extensive and diverse, making him a compelling candidate for the SEC chair position, should Donald Trump return to office. Gallagher has held various key roles that have shaped his approach to securities law, market regulation, and, more recently, the crypto industry.

He first gained recognition as a Republican SEC commissioner from 2011 to 2015, where he advocated for a regulatory environment that balanced oversight and innovation. His time at the SEC coincided with implementing the Dodd-Frank Act, a sweeping piece of legislation aimed at reforming the financial system following the 2008 crisis.

While Gallagher supported certain aspects of the law, he often voiced concerns about overregulation, criticizing how excessive rules could hinder market growth and innovation, particularly for smaller firms. Before his time as commissioner, Gallagher had already accumulated considerable experience within the SEC. He worked as counsel to SEC Commissioner Paul Atkins, which exposed him to critical regulatory issues, including enforcement actions and market structure.

In 2020, Gallagher joined Robinhood as Chief Legal Officer, a move that thrust him into the spotlight once again, particularly as Robinhood rapidly expanded its role in both traditional finance and crypto markets. His tenure at Robinhood has not been without controversy. In early 2021, Robinhood faced intense public scrutiny during the GameStop short squeeze when the platform temporarily halted trading of certain stocks. This move led to allegations of market manipulation and calls for regulatory investigations. Although Gallagher wasn’t directly responsible for the decision, his role as legal chief required him to manage the legal and reputational fallout.

What to Expect from a Gallagher-Led SEC?

Dan Gallagher’s public statements and tweets reveal much about his views on the intersection of regulation, innovation, and government oversight in both crypto and broader financial markets. Gallagher has consistently criticized what he sees as the SEC’s failure to establish a clear and workable regulatory framework for digital assets, often pointing to the agency’s reliance on enforcement actions rather than setting clear rules.

The SEC is clearly not going to step in and provide a working regulatory framework for crypto. I’m happy to see Congress filling the void.

In response to a May 2024 tweet about the FIT21 Act, Gallagher critiqued the SEC, stating, “The SEC is clearly not going to step in and provide a working regulatory framework for crypto. I’m happy to see Congress filling the void.” The FIT21 Act, which passed the House despite opposition from President Biden and current SEC Chair Gensler, aims to delineate responsibilities between the SEC and the CFTC, with the goal of offering regulatory clarity and consumer protections.

Gallagher’s vocal support for the legislation suggests that, under his leadership, the SEC could be more open to collaborating with Congress to develop comprehensive rules for digital assets—rules that don’t rely solely on enforcement but instead provide businesses with a clear path to compliance.

One of the most critical aspects of this potential shift could be how crypto firms are regulated. Gallagher has advocated for the idea that the existing regulatory framework, designed for traditional financial institutions, doesn’t suit the decentralized and fast-evolving nature of crypto assets. This suggests that a Gallagher-led SEC would push for clearer distinctions between digital assets that qualify as securities and those that fall under the CFTC’s purview, such as commodities. The current ambiguity has left companies facing legal uncertainty, and Gallagher’s approach would likely aim to eliminate this confusion.

Gallagher’s tweets also offer insight into his broader regulatory philosophy. In December 2023, he criticized the SEC’s new “predictive data analytics” proposal, calling it “unreasonably broad and burdensome.” He warned that such rules would lead to “higher costs and less technology and access for investors.”

The SEC’s new “predictive data analytics” proposal is so unreasonably broad and burdensome that it’ll mean higher costs and less technology and access for investors.

His stance suggests that, if he were to lead the SEC, he would advocate for a more hands-off approach to regulating emerging technologies, especially those that improve market access and efficiency. However, while his vision for a more innovation-friendly regulatory environment may resonate with industry players, it could face opposition from consumer advocacy groups or those pushing for stricter oversight of digital assets.

The Game of Odds

As the 2024 presidential election approaches, the odds of Donald Trump returning to the White House are gaining momentum. Data from Polymarket, a popular prediction platform, shows Trump’s chances of reclaiming the presidency have risen to 52.8%, marking his largest lead over Democratic contender Kamala Harris since she entered the race. With over $1.46 billion in total bets placed on the election, Trump has attracted the lion’s share of betting volume, raking in $366 million compared to Harris’ $285 million.

Trump’s recent surge in the polls, particularly after his October rally in Butler, Pennsylvania, has bolstered speculation about what his return to power could mean for various industries, including the crypto space. During the rally, Trump stopped short of making any direct promises regarding cryptocurrency, but he did hint at revisiting the case of Ross Ulbricht, the founder of the Silk Road.

If Trump returns to the White House, the SEC is likely to experience a leadership shakeup, with Gary Gensler possibly being replaced by a new face — Dan Gallagher. Gallagher’s appointment would likely lead to clearer rules for crypto and a friendlier environment for digital asset companies to thrive. But as with anything in both politics and markets, nothing is set in stone. The upcoming election remains a tight race, and the future of the SEC — and by extension, the future of crypto regulation—hinges on who will sit in the Oval Office come 2025.

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