Gensler Warns of SEC Operating with Minimal Staff During Potential U.S. Government Shutdown

 

Gensler Warns of SEC Operating with Minimal Staff During Potential U.S. Government Shutdown

Gary Gensler, the Chairman of the U.S. Securities and Exchange Commission (SEC), raised concerns on September 20th about the potential impact of a government shutdown on his agency. Reports have surfaced indicating that the U.S. government might face a shutdown on October 1st if necessary bills for funding operations are not passed before the new fiscal year begins.

Gensler expressed his thoughts on the matter, stating, "The public should understand that we will largely operate with a skeletal staff. Therefore, our ability to conduct regular oversight of financial markets would be severely hampered during any government shutdown, regardless of its duration."

He went on to explain that in the event of a shutdown, the SEC would be unable to review filings from companies seeking to go public and process other critical applications. Additionally, the SEC's capacity to oversee financial markets, especially during significant events, would be compromised. Nevertheless, Gensler acknowledged that markets would likely continue to function, albeit with reduced regulatory oversight.

This situation echoes past experiences, such as the government shutdown that occurred between late 2018 and early 2019. During that time, the SEC's operations were significantly limited, leading to a backlog of tasks.

The potential government shutdown could have implications for the SEC's activities related to cryptocurrencies. Notably, the SEC is expected to make crucial decisions regarding several Bitcoin spot exchange-traded funds (ETFs) in mid-October. While the agency might be able to postpone these decisions in the event of a shutdown, delays are almost inevitable.

Furthermore, other cryptocurrency-related applications awaiting decisions could also face delays due to a potential backlog caused by the shutdown.

The impact of a government shutdown on SEC enforcement activities remains less clear. Federal courts continued to operate during the previous government shutdown, which means high-profile SEC cases involving companies like Coinbase and Binance could proceed if sufficient funding for the courts is available, and SEC lawyers remain accessible. However, the reduced staff levels during a shutdown could restrict the SEC's ability to initiate new investigations and lawsuits.

Interestingly, this situation arises just a day after another SEC member suggested the agency might consider expanding its enforcement efforts.