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The U.S. Securities and Exchange Commission (SEC) announced today that Caroline Crenshaw, the commission’s only Democratic member, has resigned.
Crenshaw was sworn in as a SEC Commissioner on August 17, 2020. Although his term was scheduled to end in 2024, regulations allowed commissioners to remain in office for up to 18 months after their term expired. With the expiration of this period, Crenshaw’s tenure at the SEC officially ended.
SEC Chairman Paul Atkins, in a joint statement with Republican commissioners Hester Peirce and Mark Uyeda, said Crenshaw had made significant contributions to the institution for many years. Highlighting Crenshaw’s commitment to protecting investors and strengthening markets, Atkins stated, “With clarity of purpose and a constructive approach, he resolutely defended the SEC’s core values.”
Crenshaw’s departure reduced the number of SEC commissioners to three, all of whom are Republicans. While legally three commissioners provide a sufficient majority for the agency to make decisions, according to former federal prosecutor and SEC official Peter Lallas, this situation poses significant practical risks.
Lallas stated in a LinkedIn post, “On paper, three commissioners seem sufficient. However, in practice, this restricts the agency to a very narrow scope for maneuver.” By law, the SEC can only have a maximum of three commissioners from the same political party.
Nicolas Morgan, president of the Investors Choice Advocates Network and former SEC prosecutor, stated that the Trump administration could nominate a new candidate in the first half of the year. According to Morgan, this candidate could be an independent.
Lallas stated that working with three commissioners would make the process more difficult, particularly in decisions regarding sanctions and oversight. He explained that a potential withdrawal, conflict of interest, or absence due to health reasons could bring the Commission’s decision-making processes to a complete standstill. He also noted that even if decisions could be made by a 2-1 vote, the timing of cases would need to be much more carefully considered, inevitably slowing down the process.
Known for his cautious approach to crypto assets and his emphasis on investor protection, Crenshaw had faced intense criticism from the crypto sector, particularly for his votes against Bitcoin ETF approvals. His departure, largely aligning with former SEC Chairman Gary Gensler’s regulatory stance, is seen as a turning point for the institution’s crypto policies.
*This is not investment advice.