During the oversight hearing of the House Appropriations Committee on Wednesday, US Securities and Exchange Commission (SEC) Chairman Gary Gensler told Democratic Congressman Mike Quigley: “There are a lot of crypto tokens that do fall under the jurisdiction of securities laws.”

Gensler also said that the SEC has always been consistent in its communications with market participants, that is, those who use the initial token issuance to raise funds or engage in securities transactions must abide by the federal securities laws. Asset managers who invest in unregistered securities may also be subject to securities laws.

At the hearing, Congressman Mike Quigley (IL) asked Gensler about the possibility of establishing a new regulatory category for cryptocurrencies.

Gensler said that the breadth of the field makes it difficult to provide adequate consumer protection, noting that despite thousands of token projects, the SEC has only filed 75 lawsuits. He believes that the best place to implement consumer protection is the trading venue.

Tokens currently on the market as securities may be sold, sold, and traded in violation of federal securities laws. In addition, no exchange that trades encrypted tokens is registered as an exchange with the SEC.

Overall, compared with the traditional securities market, this greatly reduces the protection of investors and correspondingly increases the opportunities for fraud and manipulation. The SEC has prioritized token-related cases involving token fraud or causing significant damage to investors.

Gensler said that he hopes to cooperate with other regulatory agencies and Congress to fill the gap in investor protection in the crypto market.

If there are no “effective rules”, Gensler is worried that market participants will preempt traders’ orders. He said that he hopes to introduce similar protection measures in places such as the New York Stock Exchange (NYSE) and Nasdaq (Nasdaq) into the encryption platform.

But Gensler said that in order to develop and enforce these rules, more funds may be needed. Currently, the agency spends about 16% of its budget on new technologies, and the companies it oversees have considerable resources. Gensler said these resources have shrunk by about 4%. He said that cryptocurrency brings new risks and requires more resources.

This is not the first time he views cryptocurrency exchanges as the biggest consumer protection gap. At a hearing held by the House Financial Services Committee on May 6, Gensler stated that the lack of dedicated market regulators for crypto exchanges means that there are insufficient safeguards to prevent fraud or manipulation.

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