Unchained - The Chopping Block: Hester Peirce on Freedom, Fraud, & Fixing the SEC - Ep. 810

Episode Date: April 2, 2025

Welcome to The Chopping Block – where crypto insiders Haseeb Qureshi, Tom Schmidt, Tarun Chitra, and Robert Leshner chop it up about the latest in crypto. In this episode, the crew is joined by SEC Commissioner Hester Peirce—aka “CryptoMom”—for a rare, candid conversation. They unpack the SEC’s vibe shift, why airdrops might be doomed, and whether memecoins are just collectibles or cleverly disguised securities. Plus, Hester dishes on Paul Atkins’ potential leadership, the SEC’s new crypto task force, and what real regulatory clarity might finally look like. Show highlights 🔹 Hester Peirce Unfiltered – The SEC’s “CryptoMom” on vibes vs. law, the Gensler era, and why the U.S. needs a freedom-first approach 🔹 “Come In and Talk to Us” – Why the SEC wants founders to re-engage—but can trust be rebuilt after years of legal whiplash? 🔹 Memecoins ≠ Securities? – How the new SEC is redefining meme coin oversight and why “collectibles” might be the new loophole 🔹 Airdrops Are Kinda Pointless – Haseeb argues most airdrops fail to deliver value or decentralization; the panel debates 🔹 Self-Regulation in Crypto – Hester’s surprising praise for proof-of-reserves and why industry norms might beat new rules 🔹 The Howey Test Is Broken – How forcing orange grove law onto crypto led an entire industry to play armchair lawyer 🔹 Will the New SEC Last? – If the White House flips, could the next Chair bring back the enforcement hammer? 🔹 Tarun’s TradFi Feedback Loop – Why TradFi may start borrowing more from crypto playbooks than the other way around 🔹 Regulation by Meme – The SEC embraces facts and circumstances—but is “Ghibli meme policy” scalable? 🔹 What Should Founders Do Now? – The panel pushes Hester on timelines, clarity, and whether the U.S. is safe to build in again Hosts ⭐️Haseeb Qureshi, Managing Partner at Dragonfly ⭐️Robert Leshner, CEO & Co-founder of Superstate ⭐️Tarun Chitra, Managing Partner at Robot Ventures ⭐️Tom Schmidt, General Partner at Dragonfly  Guest ⭐️ Hester Peirce, SEC Commissioner Disclosures Links Miles To Go: Remarks before The Digital Chamber's 8th Annual DC Blockchain Summit by Hester Peirce: https://www.sec.gov/newsroom/speeches-statements/peirce-remarks-dc-blockchain-summit-032625  Timestamps 00:00 Intro 05:35 The Role of Regulation in Innovation 09:54 Crypto Task Force & Future Plans 18:47 Global Perspectives on Crypto Regulation 23:26 Self-Regulation in the Crypto Industry 27:27 SEC's Role & Potential Adjustments 35:04 Evaluating Memecoins & Their Regulatory Status 36:48 The Howey Test & Its Application to Crypto 43:55 Future of Crypto Regulation & SEC's Approach 47:10 Insights on SEC Leadership & Regulatory Philosophy 51:35 Advice for Aspiring Securities Lawyers Learn more about your ad choices. Visit megaphone.fm/adchoices

The thing that makes this country what it is is that we prize people's right to make decisions for themselves. And that is like that is paramount for me. And I do, you know, I understand Congress has given me a mission and I'm working to carry out that mission. But I'm always going to be thinking in that, you know, one one voice in my head is always going to be saying, but isn't there a way that we can do this in a way that's more liberty enhancing? Not a dividend. It's a tale of two con. Now, your losses are on someone else's balance.

Generally speaking, air drops are kind of pointless anyways. Unnamed trading firms who are very involved. DFIPITs are the ultimate. Defi protocols are the antidote to this problem. Hello, everybody. Welcome to the chopping block. Every couple weeks, the four of us get together and give the industry insider's perspective

on the crypto topics of the day. So quick intro, first you got Tom, the defy maven and master of memes. Hello, everyone. Next you got Robert, the Cryptic Connoisseur and Tsar of Superstate. For you everybody. Next to go Toroon, the Gigabrain,

and Grand Puba at Gauntlet. Yo. Joining us today, special guests, we have Hester Perce, SEC Commissioner, and Crypto Mom. Hello, everyone. It's great to be here. And I'm a Cive of the Head Hype Man at Dragonfly.

We are early-stage investor in crypto, but I want to caveat that nothing we say here is investment advice, legal advice, or even life advice. Please see Chopin Block. at XYZ for more disclosures. So Hester, Commissioner, it is a little bit crazy to have you on the show

because you told us before we started running, that you listen to the show while you are cooking. And so you have, you've, you've, you've, you've heard the travails that we've gone through as a show over the years. I have to ask you just to open the show, who's your favorite? I'm not going to start by telling you who my favorite is, but you guys are all wonderful in your own ways. It depends on the facts and circumstances.

Facts and circumstances, exactly. Hasim should have started with what is your favorite, moment and least favorite moment in your listening history of things that have happened on this show? I mean, my favorite moment is just that you guys are very, you're, you know, sometimes all the discussion around this industry is so everything is great and, you know, everyone is, is so excited. And you guys kind of pull that back and you rip it off and you're like, well, yeah, this is really just garbage happening in the name of crypto. and you're kind of, you know, down to earth and real about some of the bad things happening, which I do appreciate because I think that's really important for people to hear. I myself, and I'm, you know, sometimes you guys are, your language is a little more earthy than mine would be.

That is, that is, you know, I'm someone who believes people can be able to do their own thing. And so I, you know, just that's fine with me, but I say that. But I want to give my disclaimer too, which is that my views, including about which a view is my favorite, are my own as a commissioner and not necessarily those of the SEC or my fellow commissioners. Got it. What is the view of the SEC on who's the favorite? It's nobody who's easy. More importantly, are you cool if we post a Ghibli meme of you later? Is that, you know, allowed under, I think it would be good. Yeah, you know, I don't stop anyone from posting mean things. about me if it's going to be a mean mean it's not mean no it's no it's delightful it's delightful

it'll tag you it'll be wonderful the white house posted a ghibly meme so isn't that that's true ghibly mean though i know i know i'm just i'm just saying that like if it if they're doing it then can't everyone in government post a gibley meme it feels like um i think everyone in the private sector can so we'll leave it there okay good to hear so um so for those of you who are completely living under a rock. Esther Purse, of course, longtime SEC commissioner. She is known in the industry

as Crypto Mom because she has been the most full-throated endorser of the crypto industry and kind of fighting for the industry during the period of what we call

the Dark Ages of the SEC under the Genzer regime. So in most of the important cases that many of which have now been dismissed under the new SEC, Genzer was prosecuting all of these

really aggressive cases against almost every major actor in the industry. And in many of those cases, Commissioner Purse was the only lone descent in many of these cases. And I can tell you, in our Slack channels, or telegram groups that were going about talking with people in the industry, everybody would share your dissents and we would read through them. It's like reading Montescue. I don't think you understand how starstruck we are at having you on the show because you have been such a beacon of light for the industry that, okay, there are people in government who understand that, yes, there's, like,

What we're doing is very much in the core of the American spirit in wanting to build something genuinely new and innovative. And yeah, sometimes we fuck it up. Sometimes we stray from the light of God. Sometimes we scale a bunch of people. You know, yes. All those things are absolutely true. Earthy language has seen. Earthy language.

It was, apologies. Apologies, Commissioner. You don't have to apologize. Your ability to stand up for the industry has been really hardening to all of us. And so I just want to say that at the outset of the show. Well, I appreciate that.

But I do want to say, you know, it really is more of a first principles thing than an industry advocate thing. Because my view is that people should be able to do. In this country, our presumption should be freedom. There's sometimes reasons that we as regulators have to come in and say, no, you can't do it. Congress has given us statutory directives to do that at times. but in general, people should be free to do what they want to do. And then it's kind of up to other people, whether they want to buy into that or not. And I feel like that's really where we lost sight of that fact at the SEC.

And we started to become almost like we were trying to prejudge whether or not this innovation was worthy of the market getting a shot at deciding whether they wanted it or not. And that and whether, you know, regular Americans could, if they wanted, interact with it or not. And that to me is really problematic because once you accept that in crypto, what else are you going to accept that in? And so that's really what drove a lot of my concern. I do think the technology is interesting for a lot of reasons. I mean, I think disintermediating things is quite an interesting concept for someone who's grown up around the traditional financial industry where we've seen a lot of problems that have emanated from

centralized intermediaries. And so when I see the possibility of trying to get more direct, more peer-to-peer activity, that's exciting to me. But really what it is is about this first principle's concern of mine. The other thing I think many people have been heartened by is that for many of the former SEC commissioners, they end up doing their turn of duty in government, and then they leave. and they go become consultants, they go, you know, where they end up working into the industry. And you've stayed on post the Gensler regime in the SEC, as an SEC commissioner.

And very interestingly, there was a story, and I don't know whether or not you're able to comment on it, but there were rumors that people were considering you to become an SEC chair. And, you know, it's very common that an SEC commissioner, when the chair is vacant, to promote somebody from within to become the chair, there was a rumor that you did not want the role. And so they had to go out and, you know, they end up, of course, finding Paul Atkins to potentially become the next SEC chairwoman. Is that true? Can you speak to that? What do you want to do next? Why do you decide to do another tour of duty as a commissioner? Well, I mean, I have been here for a long time. I've been here since 2018. And that is quite a long time. And I do think at some point here it's going to be really important to have a new voice sitting where I am because I am someone who thinks that there's a lot of, wisdom and knowledge out there. And so having the same voice in this role for too long, I think is problematic. So I will say it's been an honor and I've enjoyed it and I still have stuff I want to do before I leave. But I'm really excited to see Commissioner Atkins, who I used to

work for coming back as a chairman. And I think he'll really rejuvenate our approach to lots of things, including crypto. So I think that'll be good. Running a big agency is, is, is not an easy job. And so I think it's, uh, it's, it's, it's just as well that someone else is, is going to be doing that. So does that mean you didn't, you didn't want the, you genuinely didn't want the role. I did not want the role, but, but again, I'm, I'm very excited about the person who is taking the role. And that's not to say that people wanted me to have the role. I'm just saying that it's not a role that I wanted. Understood, understood. I understand. I think the industry. I think the history as a whole was excited about you, given your track record as commissioner.

So maybe that's where some of those rumors came from. Yeah, I mean, and again, there's a lot to be done. Right now, I'm running the crypto task force, as you know. And that is, there's a lot of work there to be done. And so I think that probably is a better use of my time right now than trying to run the whole agency. Again, even if that were offered to me, I think that probably wouldn't be the best use, and I would not be the best person for that job. Talking about the Crypto Task Force, you know, this is something that I think, you know,

everybody is excited to see from, you know, the crypto retail public to, you know, the halls of Congress. What do you think the sort of, you know, win state is for, you know, the task force? How do you find success? What does it look like, you know, what's the time frame? And what are your expectations? I mean, there are a lot of things that we should be doing. It's a short time frame, right? Because the task force is not something that should be in existence for all time. So we should be trying to get some near-term wins. What's the low-hanging fruit? What are the types of guidance documents we can put

out right now to tell people what's outside of our jurisdiction? Because I think there have been a lot of questions about that, many of which we've created. So we can carve some things out. And then for things that are in our jurisdiction, how can we help people to comply with the rules, applying the technology or matching the technology with our rules? Where do the frictions come up? And what can we do to eliminate those frictions? And then working with Congress and others on longer term solutions to see what a regulatory framework would look like more permanently. There will always be a piece of this space that's within our regulatory jurisdiction, I think almost no matter what happens in the legislation, because tokenized securities are going to be a thing and already are a thing. So I think that's

going to be within our space. But we won't need to have a crypto task force that's specifically devoted to that. You're right now facing this giant chasm of just, you know, we've had digital assets now for, what, 16 years in the U.S. We have not had a single law passed. We basically have a smattering of rules here and there, but there's a lot of just kind of informal guidance and then a lot of vibes. People know the vibe is shifted, right? That's what they know.

They see the cases being dropped. They see the speeches being given, but nothing has actually substantively and legibly changed yet. What would you say to an entrepreneur who's looking at this and saying, okay, it feels like something has changed, but I don't know how it's changed. I don't know what I'm supposed to do with this. Does it mean I should move to New York now

because I should mean I no longer do foundations and this convoluted overseas structures? What does this mean for somebody who's building today or who has a startup today? Yeah, I mean, you know, we still live in a world with bureaucracies and that means that things can take time. But I do encourage people to,

I mean, I hate to use the, the tagline come in and register, but definitely come in and talk to us and let's figure out how you can register. I don't think you're allowed to use that term ever again now. Unfortunately, I'm sorry. But so let's let's figure out how you can do what you're trying to do. And I think that's really what I would tell someone, tell me what, tell us what you're trying to achieve and where you think it bumps up into the securities laws. And we'll try to figure out a way for you to move forward. And that may be telling you, you know what, you actually don't have to worry about the securities laws, or it may be saying, yeah, you do, but we can make these adjustments

to let you do what you're trying to do. And I think that's really, to the extent that we can, we can, we will provide some very short term, I mean, in the sense, in the short term, will provide guidance to some people on ways they can move forward. Some things people want may take a little bit longer, but we really are looking for what can we do immediately. And maybe it's not guidance specifically for your project, but maybe it's more general guidance to say, you know, sort of like we did with the mining, you know, to say, look, that doesn't look like something that's generally going to be within our remit. So I think that's, that's what we're telling people whether, and we do want to get away from people having to structure their businesses to avoid any interactions with

the SEC, which is, I think, what was going on before. And I'd like to change that. So historically, okay, so it sounds like your answer is, come in and talk to us, not come in and register. And we will give you some guidance, right? I think that, that makes sense, but it's obviously not scalable. It's not plausible that every founder everywhere in the world is going to come It's probably what is scalable, right? If everyone's running into the same friction, then, and we hear about that from people, we can say, okay, let's try to address this friction, because a lot of people are feeling it right now. And when you address that friction that's large enough, do you see it being in the form of staff guidance similar to the meme coins or

the proof of work mining? Do you see it coming in the form of no action letters? Do you see it coming in some other format? Like, how do you think the sort of, you know, larger format changes will roll out. I think all of the above. I think we're going to try to, you know, staff, staff guidance on some things is the right way legally to go about it. That may get at some point baked into a commission level statement or into a rulemaking. No action letters are an option for us. It's a tool that we can use to, to, you know, provide the parameters for a particular project, but that can be something that, you know, if we issue a number of these, people can kind of get a sense of where the parameters are. Again, it's staff level generally. You can do commission level,

no action relief, but it's typically staff level. And then we can work towards rulemaking in areas where we think that makes sense. And then we can work with Congress to see what they want to put in legislation. So I want to push you a little bit on this answer because, you know, I think that's think given what the SEC has done over the last couple of years or the last, you know, four years, the reality is that for most founders, they've learned just through experience how scary it is to interact with the U.S. government. The U.S. government is the most powerful government in the world, whether or not you are a U.S. citizen.

And people might say, like, well, you know, everything's changed, but, well, no rules have changed, no laws have changed. Like, you know, right now all that is that, okay, well, you know, Hester is now running the show and that's great. but I think for a lot of people, they just reflexively have learned, you know, this is not something that they're ready to trust yet.

So for a founder who says, okay, look, I don't want to take unnecessary risk, right? Being sued by the SEC is one of the scariest things one could possibly imagine. How long should they expect to wait to get clarity and legible guidance rather than, hey, come in and talk to us

and we'll tell you, whether through no action letters or through informal guidance. I mean, again, these things do take some time. And I mean, I hear you on that. It's also a reason why we want to get as much of the relief into more durable form as we can because government should not be a government that turns on who's sitting in my seat. Right. We should be we should be taking an approach as an agency that is, you know, we spell out what the rules are and then people are told, it's, you know, you know, they get help complying with them. And then if they don't comply, then we bring enforcement actions. And because we flip that script, it really has everyone really concerned to interact with us. But I think if people don't interact with us now, we can't get to a place where we get good, durable relief.

And so some of this is just going to be painful and it's going to be slow, but we're trying to be as quickly, we're trying to move as quickly as we can. there are hoops we have to jump through inside the building. We can't just, you know, as much as I would like, just put out statements. They do have to go through a process here. So it's not a fully satisfying answer. And I think we need to have a bigger conversation as the, you know, as American people about getting government back to a place where it works for the people and it's not viewed as, being the way it's viewed in so many other countries, you know, as having the upper hand in

conversations, right? We should be viewed as regulators working for the good of the American people. And I think that is a very important conversation for us to have. And I think it's not just limited to crypto. I think it's much more, much, much bigger of a conversation. So I know that's not a fully satisfying answer. Are there, you should have mentioned other countries, are other countries that you look to for inspiration or you think Congress should be looking to? And as an example of how to do crypto regulation the right way? I mean, I think different countries have taken approaches that we can draw from. I think different, some states, like Wyoming, I feel like got out there very early and they sort of saw that there was value in trying to figure out some early solutions. I think Europe was

was smart to get their MECA regulation done early. And maybe we can learn from some areas where that is too hard to deal with. The UK has done some things that are, you know, trying to do some sandboxing and things like that. So I think there are places that have tried to do things the right way. And we can learn somewhat from them. But I hope we can find a truly, you know, a unique approach that is really very pro letting people try what they want to try with reasonable

parameters. And that's something that a lot of other countries aren't as comfortable with. So I'm hoping we can do that. And that doesn't mean anything goes. And I think that is a point that we need to be careful on. You know, it's like this is not open season for fraud. That is something that we're still very eager to bring enforcement cases around to the extent it's within our jurisdiction. And if it's not within our jurisdiction, it's within someone else's. And so, you know, don't do that. Actually, I have a kind of related question on this idea that, hey, you know, people should be able to innovate. One kind of thing I think we've seen in the last three to four years is a lot of innovations

from crypto in terms of like 24-hour trading, some of the changes on the futures market side, like people trying to launch perpetuals exchanges for, you know, equities and things like that. Like there's actually innovations that flow back to the traditional market. So how do you view that in terms of like how regulation will play a role there and or how do you envision, you know, regulations that maybe start in crypto that then, you know, if some of the technologies end up

back into traditional finance that they port over or they don't? Or how do you view that interaction? Because I could imagine that that's actually like something that will grow over the next few years. Yeah, I think it will. And I think it does in some ways complicate things, right? Because we can't just hive off crypto and say, okay, we're going to have a set of rules here that work here. And they won't have any effect on the traditional markets we regulate.

But in general, I think that's a good thing because one of my concerns about the traditional financial markets. While we, I think we have the best capital markets in the world, and I think part of that is because we've taken a relatively sensible regulatory approach, the barriers to entry still are a real thing. And so I think we haven't seen as much innovation in traditional financial markets as we have in some other areas because people haven't wanted to jump through those regulatory hoops. And so, So if now by bringing, you know, cryptos on the scene and by some of those changes that are happening in crypto, we can see, wow, there might be a more efficient way to do something in the

traditional financial markets. And so it becomes almost like a place where we can say, okay, well, we're going to test it out here. And maybe if it works here, we can port it over to the traditional financial markets. And now, I think, now that the attitude, has changed at the SEC, you'll see a lot more interest by traditional financial players in experimenting with the technology. And so I think that also will push things in a way that could be very positive. On this sort of also idea of the industry, you know, being innovative in some way and then traditional markets looking at it, there's also been this trope of, you know, the industry will self-regulate. And I think that's been true in some cases.

obviously there's more to be desired. Are there things that you point to of like, yeah, this is the industry self-regulating and sort of, you know, raising that the bar or the things that you want to see more from the industry in terms of, you know, quote-unquote self-regulation? Or is that just a totally bunk concept? I'm just trying to get a gut check, I guess. No, I mean, I'm a big believer in true self-regulation. And I think the technology itself can be very useful in that respect because it's much more open.

You can see what's going to happen. if you follow the code, you know what's going to happen. And I think that's actually really good. And I think it's also helpful that everyone can play on the same terms. But, you know, if it truly is open source and it's truly decentralized, then everyone can be there on the same terms. Those are good things. And I think that's a form of self-regulation. I think there are other forms of self-regulation, like identifying bad players if you see them. And I think something else that people have tried. and feel a little burned on is, you know, there are things like trying to figure out whether something was in the securities bucket or not. And there were industry groups that were getting

together and trying to put together some ways of analyzing that question. And I think they really felt like the SEC was very dismissive and didn't appreciate those efforts at all. And so that, I think there's less of that kind of self-executive. regulation than there otherwise would have been. So I hope we can incorporate some of that. But I'm always a believer that if you can get the market to provide the discipline, it's going to be more effective. It's sometimes a more brutal form of discipline, but it can be more effective. And so it's going to be a mix of government regulation and self-regulation, but let's let self-regulation do as much work as it can. And I saw you mentioned in your most recent speech, Proof-Refers,

as being one of these examples of, you know, post-F-F-TX exchanges just started doing this. Not because they were forced to, obviously, but just because basically they needed to win back consumer trust in the wake of what happened with FTX. And so I think there's probably a mixture of both, okay, sort of the SEC sort of guides, the SEC and other agencies guide the industry in the direction of, hey, we want reliable disclosures and consistency and safety and so on. But the industry also kind of showing the way of like, hey,

there are certain disclosures that we have just, evolved of proof of reserves or you publish the, you know, the sort of ownership charts of different tokens or there's transparency into the vesting schedules and these kinds of things, or the code of an open source project that, you know, a traditional securities regime has no concept of. But in crypto, obviously the industry is telling you, we all need this in order for us to feel secure in interacting with these assets. Yeah, I mean, I think those are great examples. And one of the things that made me really sad over recent years, is that not only were we doing all this stuff using enforcement as our way of effectively

regulating or ineffectively regulating the industry, but we were also sort of scoffing at efforts such as proof of reserves, where people were looking at ways to organically figure out some of these problems. And it's not to say that it's wrong for people to point out where proof of reserves isn't actually useful. You know, you can do it in ways that is not. credible and you can do it in ways that are. But I think when we've tried to dissuade people from like auditors from even getting involved in those kinds of things, that's actually not helpful. You want people to try these kinds of things. And then thinking about, you know, efforts to get more disclosure out there, that's wonderful. And I think a lot of people were scared

to put disclosure out because then they worried that it would put a target on their project. So I hope we can be in a better place where that's not the case and where we can really celebrate the parts of the technology that either substitute for regulation or make it easier to regulate. So I hope we can get to a better place. I'd like to double click on the disclosure conversation a little bit. Because right now, up until the present, we've been in this sort of weird state where, you know, A lot of crypto assets are not registered with the commission. And there's questions about, well, do they need to register? Are they even securities?

And right now, when it comes to market, structure conversations, you know, we don't know. For assets that aren't securities, right, and that's an ongoing conversation, you know, between, you know, the halls of Congress and the SEC and the public at large. But what do you envision as, if any, the sort of disclosures that, you know, non-security assets, should be making, could be making, or on the flip side, whether, you know, as long as things are completely open source, you know, the code is the disclosure. I mean, how do you, how do you visualize all this? Yeah, well, I think an asset that's not a security might be issued in a transaction that is a securities transaction, and then we already have rules to govern that,

and we can think about whether we need adjustment to make sure that we're getting the right kind of disclosures. But for something that's truly, you know, it's a digital asset and we decide that they're commodities, which I actually think probably many of these are, it still could be useful for people to have disclosure. And so query whether that's something that a trading platform, that's a role for a trading platform that's offering that to try to gather all the information that's publicly, you know, assuming the project is kind of a decentralized project. by now, you know, could the trading platform gather that information and make it available just as as part of what it does? Or if you do still have a team behind it, do they want to just, you know,

as part of kind of good governance and trying to build a good environment, do they want to make information available about, for example, what the tokenomics are? Are they holding back a bunch of these that they're planning to dump at some point? That would be good for people to know. So I think that there can be a mix of sources for it. But if it's not, if the asset is not a security, I'm a little bit hard pressed to figure out how the SEC is the disclosure regulator unless Congress gives us that kind of authority. And so we just have to see how they think about that. I mean, I could potentially see a scenario in which, you know, through some broad exemptive relief, you know, the SEC does create the standards for, you know, in certain situations, this is what you need to disclose, right?

You know, just like the disclosures for asset back securities are different than the disclosures for publicly traded equities, right? And that's, you know, through, you know, commission action and say, well, okay, well, you don't have to go through these steps if, as long as, you know, the public understands X, Y, and C. And so I could see a situation in which the, you know, commission says, all right, you don't have to, you know, register as security because it's not a security. as long as, you know, trading venues have access to all the information necessary for people to trade it, etc. You know, it'd be very interesting to see, you know, what, you know, the staff and the commission thinks the public should know about an asset. You know, they get into the particulars, you know, besides the distribution schedule of it. You know, is it, you know, network information? Is it, you know, original team developer information? Is it, you know, the way different protocols work under the hood, you know, what the security risks are?

You know, really just getting into what are the facts that people would benefit from for both, you know, capital formation and investor protection genuinely. Yeah, I mean, I think that's something that we're trying to think about and get people's input on what information actually is valuable. It's something I tried to think about in connection with the safe harbor that I put out a few years ago. And I think that's, you know, those are the kinds of, of, we're getting good feedback on kind of what, what information would be useful for people. I do want to be careful that we're not, you know, overstepping our jurisdictional bounds. And so I think there could be really good information. And we could, we're a good disclosure regulator. And so I think we could put together a good disclosure regime. But if it's not for for securities and securities transactions, then that may be

something that Congress has to explicitly tell us to do. I will say that is a big vibe shift from your, from the previous SEC, because it did seem like the previous SEC was very much trying to pull as much into their regulatory ambit as possible. But I also, okay, so we've been, we've been, we spent enough time criticizing the last SEC. But I think one of the reasons, though, that they were trying to do that just to, you know, I understand where they're coming from in the sense that there was a lot of retail interest in this stuff and people were putting a lot of money into it and they weren't getting the kind of information they needed. And so I think, you know, that's something that we all want to change. And I think that's, let me ask you this.

What is something that you think the previous, the previous SEC under Chair Gensler did well that it doesn't get enough credit for? I mean, I think that... Silence is everything. Okay, okay, got it. All right, we can move on. But if we're talking about in this area, I think that we did bring some cases,

some fraud cases that were important to bring. And I think, you know, that was important. And there was, there were a lot of shenanigans going on. And I think trying to say, look, we're not going to tell you those shenanigans are okay. I think that that was a good thing. And then I will say another good thing, which actually doesn't get a lot of attention.

And we could have done more in this area. But kind of quietly, there was some progress being made in the investment management space on asset management type sort of accommodations and working with issuers in that space to try to figure out how could you issue a tokenized money market fund, those kinds of things, which, you know, I think that is progress that was kind of a little bit under the radar. We could have done more on that front, but I still am happy that we did some. I will say also, you know, obviously we manage crypto investment vehicles,

and crypto investment vehicles didn't really fit into the SEC's rules around investment advisors. but I think the SEC was actually impressively accommodative and understanding that, hey, these things ought to exist. Let's work with people in the industry to make sure that there is capital formation coming from regulated entities. So that's one place I think also the SEC doesn't get enough credit, isn't being open-minded and willing to work with the investment industry. And I think that is a little bit of a signal that there are a lot of people on the staff

who are eager to work with the industry in a productive way to try to get to some reasonable practical, workable solutions. It's just that they did it where they could, but there were a lot of signals coming from the commission that shouldn't be happening too much, so not too much of that happened. That makes sense. Okay, so let's shift gears a little bit

because I know many people who are listening want to hear us talk about meme coins. So I think half the people listen to show hate that we talk about meme coins, and then half of them it's all they care about. So one of the big, statements that was made from this new SEC was basically the statement that meme coins are not necessarily

securities, meme coins can be collectibles, kind of what more or less everybody already thought, which is that, of course, things like Dogecoin are not securities. It's hard to imagine who would be issuing securities disclosures for Dogecoin. But it left to facts and circumstances, whether or not this thing actually is or is not a security. So when you look at the meme coins that are launching in recent times, obviously the most famous of which is Trump token.

Trump was launched by then-President-elect Trump, now current president. It has 80% of the supply controlled by a for-profit company that is controlled, a majority by Trump. You also have things like Melania token. We've also seen all sorts of other shenanigans with things like Libra. Help us understand is the new, I think many people are interpreting the new posture from the SEC to be, in the crypto parlance, crime is legal. And basically, look, if you want to launch a meme coin, you can do basically whatever you want,

as long as you call it a collectible. What is, how should we understand what the contours are of something that's a collectible or something you describe as a collectible versus something that is a, you know, a security and enrichment scheme, something that's controlled by some kind of central party that should be issuing securities disclosures? Well, I mean, you do have to look at the transaction in which the meme coin was sold and try to understand whether that transaction is a securities transaction. And I think that, you know, one way that you can do that is look at it through the Howie test,

which everyone knows so well. But obviously, I mean, I can take a share of a stock and I can call it a collectible and you might collect it and pass it on to your kids, but that doesn't mean it's not a share of stock that we regulate. So, you know, I guess people need to think about what the actual meme coin is, what that token is. And then they need to think about what kind of transaction. it was offered in. But I guess the other point I would say is just because we don't have jurisdiction over something doesn't mean that there isn't some other regulator or state, you know, at the state or federal level that doesn't. And so, you know, I'd say beware of just a feeling that you can say whatever you want and sell whatever you want and lie to people and take their

money and assume that no one's going to come after you. I think that's not the right takeaway. So is that a nod to like fraud statutes or what are you? Yeah, there are fraud statutes out there. And so I don't know why people think that that there's no there's there's there no consequences for bad conduct just because it's it's like people think that because the SEC, I guess, has been such a dominant part of the conversation. They think the SEC is the only regulator in the whole wide world that could ever bring a case on anything. And that's exactly how we got into this situation is for people to stop thinking about, you know, they need to stop thinking about the SEC in that way. And they need to start looking at what did Congress actually tell the SEC to do? And does this

activity fit within that? If it doesn't, it doesn't mean that Congress didn't tell the Federal Trade Commission or the CFTC or the DOJ to do things. And so I just think people really need to recalibrate and stop thinking that every time we come out with a statement means that nobody in the world regulates it because we said we don't think we regulate it. On the Howie bit, I'm also curious kind of going back to the industry. I think there's also a truck in the industry that Howie is almost 100 years old. maybe it's not sort of the right framework for, you know, regulating and looking at digital assets

in 2025. Andresen sent a letter to you recently kind of along these same lines. How do you think about how we, like, what would a new how we look like in 2025 that we were sort of reasoning from first principles about what is a security was not a security? Yeah, I mean, I think how we trying to figure out what an investment contract is a really interesting question, not only in the crypto context, but sort of in other contexts. And you see the cases over the years, you know, trying to figure that out. Is this actually an investment in money in a common enterprise with the expectation of profits based solely on the efforts of others? That's not always an easy question, whether you're talking about condos or you're talking about chinchillas or you're

talking about crypto. That's not an easy question. And so I think it's been particularly challenging in the crypto space. And that's why I wish we had sort of thought more carefully about the application at the SEC, because I think it is quite difficult to figure out when it makes sense. And I think you're right to point back to, okay, let's go back to first principles. When does it make sense for this to apply because of the economic realities of what's going on? And that's really what we're trying to wrestle with right now is to try to figure out how we can reduce that to guidance that is helpful to people and is easy to apply without having to hire 10 different lawyers and find out what the majority of them say and then go with that, right?

We really want to have a clear, clear lines. And it's never going to be, you know, we've seen that there are cases in other areas, not just crypto. So it's never going to be easy, super easy, but I think we should think what we can do to make it easier. I like that point that it kind of shows a failure of policy that everybody in the crypto industry knows what the how we test is. And everybody in the crypto industry has had to become a kind of armchair lawyer when really, you know, this is not like, you know, this is not the way that a good society ought to be run, is that everybody kind of feels like they're having to divine what this rule that was. made for Orange Groves means for this new industry. And nobody knows. There's no authoritative answer to that question. And I mean, the application in the Howe effect pattern was so much

easier because you had Orange Groves that people were buying a slice of plus they were getting an invest, they were getting a service contract with that. And it's a very different scenario when you're sorting through statements that people are making, you know, on podcast to say, you know, there's some sort of investment contract that emanates from that. And so I really think we have to think much more, with much more precision to try to think about the application on the unique circumstances of crypto projects. And so how can we make sure that we're capturing capital raising transactions, which is what we really want to capture? But we're not stifling the ability of people to sell tokens, which don't come with an investment contract. I don't,

I don't think it's that easy. And I might think about it quite differently than other people, because I think there are lots of things that you can, and some of the commenters who have written in to the request for information have made this point, right? There are lots of products that you can sell in order to raise money so that you can build out a network of some sort. And so we want to make sure that we're treating that kind of scenario the same way in the tangible products world as we are in the crypto products world. And that requires some additional thought. Yeah. I think at the end of the day, like the easiest way for people to be able to differentiate what they're allowed to do and what they're not allowed to do is to just see examples

of this one's okay. This one's not okay. And under the previous administration, there was just, there was no answer to what's okay. It's like, well, you know, we brought cases against these guys. We haven't brought case against these yet. Who knows, we might. Bitcoin's okay. Nothing else will give you an answer about. And it just makes it that everybody is forced to have to play lawyer.

And of course, most of us play badly because we're, you know, we're not lawyers. So I'm, I'm hardened to see how much things have changed and this movement away from enforcing by regulation. But there's also, there's always tradeoffs to all these things. So one of those tradeoffs that many people pointed out is that there's been much reporting that the SEC has reshuffled a lot of people and moved a lot of resources away from the once crypto enforcement unit to other assignments, presumably, as well as Doge has now recently come into the SEC, and we've all seen the shadow of death when it comes to government employment that Doge represents. And so the assumption for most people is that this means the enforcement capacity of the SEC is going to go down. Now, most of these enforcement capacity was poorly allocated, let's say. But does this mean that we should expect to see bad actors be able to proliferate?

From what I'm seeing, many people think that this is what's going to happen, is that both we're going to see more good actors and we're going to see more bad actors. I hope we don't see more bad actors, personally. Well, I think we all hope that I hope. So I think one concern I've had about the approach that we took in the past is that you can throw a lot of money at enforcement cases, and they are very expensive for the SEC. I know they're very expensive for people on the other side. They're also expensive and resource intensive for the SEC if they're being litigated. And so you can spend all that time. And meanwhile,

there's no way you're going to get to, you know, even a hundredth of the stuff out there, because you've got to pick and choose which things you're spending your time on. And so it's actually a really inefficient way to regulate. And so if you can get some sort of clarity in the regulation, it makes it easier to distinguish the bad actors from the good actors. Now, some of these bad activities will not be within our space. We can talk with other regulators about how they might play a role in going after some of that bad conduct. Some of it will be in our space. And we have, we still have a unit that will, it's the cyber and emerging technologies unit. which is led by, you know, a really seasoned enforcement lawyer here. And that unit will still be

bringing cases in the crypto space and where there's bad conduct. So we will certainly still be spending enforcement resources, but I think more judiciously. And, you know, then more generally, there's there's a big push across the entire government to be more efficient and and we will do our best to do that. We have we've we have lost quite a few people and so we will have to play smarter with fewer people. And so we'll be looking for ways to do that. But I think that's one of the things that when chairman Atkins, assuming he gets confirmed when he comes in, because he brings a very deep knowledge of this agency, over many years. I'm sure that he has some ideas about trying to make us as efficient as we can, even if we have fewer resources. So Atkins has not been confirmed yet, of course, but the assumption is that he's a very well-respected guy. He's very likely to get confirmed, given who else has gotten confirmed from this administration. The sense that everybody has, he is obviously very well acquainted with the crypto industry. He's advised several crypto-startops.

he's been involved on the regulatory and lobbying side. He's also himself and avowed libertarian. And so I imagine you to probably see eye to eye on many things. Where do you anticipate from your conversations you've had with him where you and soon to be Chair Atkins disagree? Well, I mean, I worked for him many years ago. So I do see eye to eye with him on many issues. You know, he's been a formative influence in my performance.

professional career. I do tend to be someone who, if you're going to put SEC commissioners on a spectrum, I tend to be someone who is always thinking, not looking to regulation as the first solution, but looking to regulation as the last solution and thinking about what can we do to make sure that people have the freedom to interact with one another as they want to without having a government regulation come in and say, no, no, no, you can't do that. in a very paternalistic way. So I'm always going to be on the side of the spectrum that's really concerned about constraining Americans' liberty.

And, you know, I think that I don't want to speak for commissioner, and I hope soon, Chairman Atkins, but that's always where you're going to find me on the spectrum. And so, you know, we'll... Do you think you're more to that side than... I think I'm more to that side than most people. And I'm upfront about that, right? I mean, I love the fact that I have colleagues that I've worked with that have different approaches to things, but you're always going to find me on that side of the spectrum because

I think we, the thing that makes this country what it is, is that we prize people's right to make decisions for themselves. And that is like, that is paramount for me. And I do, you know, I understand Congress has given me a mission and I'm working to carry out that mission, but I'm always going to be thinking in that, you know, one, one voice in my head is always going to be saying, but isn't there a way that we can do this in a way that's more liberty enhancing? So you've got this very classical liberal mentality toward regulation and the role of government. What, I have to imagine that you've had disagreements with previous commissioners and or, you know, obviously, Chair Gensler. How do those disagreements actually play out? Is it purely you

guys are exchanging barbs via the pen and by dissents or is this like, are you guys pounding the table? Help us understand in the movie. How much of that is real? I'm trying to get stuff changed, right? If we can change it, that's better. I'd rather not have to write a dissent. I'd rather we didn't bring that stupid enforcement action. I'd rather, you know, we just not do it. And then I don't have to write a dissent. And again, this is not intended to be a critique of the staff. These are decisions, these debates happen at the commission level because it's the commission that's directing how the resources of the agency are spent and what cases we bring and what rules we write. I'd rather tell people when we're looking at redefining the term exchange and it has very profound implications

for decentralized stuff. I'd rather tell them, you know what, don't do this because you're going to destroy something that you don't want to destroy. You don't want to run it out of the U.S. And I'd rather have them say, you know what, Hester, we think you're right and we're not going to do it. But I mean, I think often what it comes down to is that you can make changes on the margins, especially when you're in a minority commissioner spot, but you can't figure out which direction the bus is going to drive. And so you hang out the side and yell and say, we're going the wrong direction. And it usually doesn't get the driver to turn a around. Well, I'm frankly very happy that you're the one driving the bus when it comes to

crypto policy within the SEC at this point. Well, I appreciate you saying that, but I think the truth is that there are a lot of really good people who are at the SEC now who are really good lawyers, and they're the ones that are thinking about this stuff, and they're doing the hard work. So I think they deserve the credit. Well, just to, you know, give you a a free pitch for the SEC. Is there anything you would say to aspiring securities lawyers who are listening to this episode right now who are thinking about a career in government? Well, I would definitely say it's a good thing if you want to be a securities lawyer to spend some time in the government to see how it works from the inside. I know having worked at a law firm and then coming into the SEC,

there are just things that you can only learn by being at the SEC. And I think the other thing I would say is, you know, a lot of times people say, Hester, why are you even at a government regulator? You know, you just heard me say, like, I'm really, I love maximizing people's ability to make decisions for themselves. So what are you doing sitting in a regulator's chair? And I would say, I think it's really important to have people who work at regulators who do not think that regulation is the first solution. They think it's the last resort when you can't solve things in other ways. And so, you know, that would be my other pitch is don't think that you to be in a regulatory spot you have to think regulation is always the answer. So speaking of what you're saying about, you know, being on the

minority of the commission and not having the power to be able to move things. One of the fears of many people is that, okay, right now we've got very pro-crypto presidency, got the House, got the Senate, and so now there's this carte blanche to be able to have this more pro-crypto regime. But the pendulum always swings back. And when that pendulum swings back, it may swing back in a very aggressive way, let's say, especially given the positioning of this White House, let's say, with respect to digital assets. How do you think that's going to fare, given that so far we still have no laws, we still have no rules? Obviously, there's anticipation that there's going to be something that's harder to undo.

But how much confidence do you have that a subsequent administration or subsequent SEC commission is not going to be able to basically take us back to where we were four years ago. I mean, I think what's going to happen, I hope will happen, is that even with the temporary things and, I mean, the short-term things that we can do before there's regulation or legislation that's finalized, people will start to be able to experiment and use the technology to do real things that are interesting and that people who might have a, a different philosophical bent than I do, say, hey, you know what, this could actually make our

financial markets and our society a better place. And so they won't want to undo it because they'll see what it can be used for. And I think this is one of the great travesties of what happened before because we saw all this, you know, a lot of garbage activity happening in this space. And so the people who were trying to regulate it out of existence would say, well, look at all this garbage activity that's happening. It's clearly something we should regulate out of existence. And I would say, well, yeah, but they're engaged in that garbage activity because you've told them and that if they try to do things in a way that's legitimate and, you know, forward thinking and, you know, they're trying to do things within bounds that makes sense. They're trying to meet an actual need. You come in and you

shut them down. So there's a reason that everyone's just doing garbage stuff because it seems like that's the less legally risky thing to do, which is perverse. And so I hope that in this moment, people will focus their attention on doing real stuff and, you know, making this, making the case that there is something here that's worth keeping, even if your proclivity is to regulate more heavily than I do. So if I can reiterate your answer, it's on us as an industry. Yeah, it is. to rise to our full height and actually deliver the value that we keep claiming that we have in store. I like that as an answer. I know that we're up on times, but just before we close out, I'm fascinated to know

what is your crypto content diet? What else do you consume besides the chopping block to keep up with the industry? I mean, I listen. Well, now I'm listening to lots of comment letters that come in. So that's my biggest crypto diet now. but I listen to as many podcasts as I can, and they just, they run the gamut. So if anyone has good recommendations for me, I am not. Can you name a few?

I mean, I listened to on the, on the brink, I listened to, um, uh, epicenter. I listen to bank lists. That's a deep cut. What really? Yeah, I mean, that's sometimes, that's sometimes too deep for me, but I still like it. Okay. They're, they're, you know, if you look at. at my, if you look at my iPhone, it's like basically all crypto podcasts of various sorts.

No kidding. Yeah. Wow. Do you read crypto Twitter as well? You know, some, but I find that that is sometimes not very productive because it makes it. It just makes you more to regulate this industry so much more. Yeah, it's given me a very depressing view of the world.

Trust me. We feel the same way. We feel the same way. Well, Commissioner Purs, it's been an absolute pleasure. Thanks for coming on, and we'd love to have you back again someday when we've done something bad and we need to apologize. Well, let's hope that you can have me back on when we've done something that you think is good and is actually moving things forward. And I hope that everyone out there can help us get to a better place. So thank you very much for having me on.

This has been a really fun conversation. and helpful for me. We'd love to do that. Thank you, Commissioner. Thanks, everybody.