The SEC Chairman sought an additional $70 million in funding, citing crypto markets that were “rife with noncompliance” as one of the reasons.

U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler made a case for millions of dollars’ worth of additional funding to be allocated to the agency in an effort to protect investors against adverse market participants, including the crypto industry.

Speaking before the U.S. Senate Committee on Appropriations on Wednesday, Gensler cited “the wild west of crypto markets” that were “rife with non-compliance” in making his case to increase dozens of additional full-time staff to the SEC’s roster.

“Such growth and rapid change also mean more possibility for wrongdoing. As the cop on the beat, we must be able to meet the match of bad actors. Thus, it makes sense for the SEC to grow along with the expansion and increased complexity in the capital markets,” he said. 

Gensler disclosed that the SEC’s enforcement division had brought 750 enforcement actions in the financial year 2022, which resulted in $6.4 billion collected in penalties and disgorgement. A number of these enforcement actions have targeted crypto firms, earning the SEC a reputation for employing a “regulation by enforcement” approach.

The SEC Chair defended this approach, saying that the SEC had spoken to the market on a somewhat regular basis through enforcement actions since the 1960’s, in response to a question by an audience member at the National Press Club earlier this week. 

Some U.S. lawmakers have questioned this method of addressing regulatory issues, with two members of the U.S. House of Representatives suggesting that the regulator adopt legislation-focused rule making instead.

“A statutory framework would establish a process for firms to come into the regulatory parameter and comply with consumer protections, rather than relying on enforcement actions to punish a bad actor after the damage has already been done,” wrote U.S. Reps. French Hill and Dusty Johnson in a July 19 letter to Gensler.

The SEC cannot continue to regulate by enforcement. The lawsuits filed against digital asset firms are not protecting the public and are stifling innovation and growth.

My letter to SEC Chair Gensler ⬇️ pic.twitter.com/RjoBNs5YQs

— Rep. Dusty Johnson (@RepDustyJohnson) July 19, 2023