The two-minute video clip has a low-budget, jittery feel. Quick, clumsy transitions tee up self-consciously cheesy reenactments. The vibe is high school AV club—except for the clip’s narrator. He looks like a stock photo of a bureaucrat, in a dark gray suit jacket and blue dress shirt. His wide-set eyes never look away from the camera; his hands never stop gesticulating.
The man is the chair of the Securities and Exchange Commission, and as elevator music swells, a title screen reveals this to be another edition of “Office Hours With Gary Gensler.” Normally, these short videos are upbeat explainers on topics from SPACs to offshore shell companies. But this is a special edition about the perils of celebrity-sponsored investment products. (Short summary: Be careful!)
Gensler shared the episode with his 250,000 Twitter followers on Oct. 3, 2022, and it was particularly special because it coincided with big news: The SEC had extracted a $1.26 million settlement from Kim Kardashian, related to the actress failing to disclose that she had been paid to plug a scammy cryptocurrency token on Instagram. Published at the outset of the Monday morning news cycle, the video had the desired effect: Media outlets from CNBC to the New York Post lapped it up. The SEC—and Gensler—appeared everywhere.
Today @SECGov, we charged Kim Kardashian for unlawfully touting a crypto security.
— Gary Gensler (@GaryGensler) October 3, 2022
This case is a reminder that, when celebrities / influencers endorse investment opps, including crypto asset securities, it doesn’t mean those investment products are right for all investors.
Federal agency heads—typically buttoned-up lawyerly types—don’t traditionally devote their time to semi-cringey social videos. But Gensler has posted more than 30 episodes of “Office Hours,” each one a potential magnet for media attention. In an early November interview with Fortune, Gensler describes “Office Hours” as core to his mission. Investor protection and education, “engaging with the public,” are what the SEC should be doing more of, in more creative ways, he says—to give investors the information to make good decisions. “It’s about articulating what this reform agenda is,” he says.
At the same time, “Office Hours” is cheeky and unabashedly combative: quintessentially Gensler. He’s been an SEC chair like no other—a fixture on TV and social media. And he relishes battle, whether it’s sparring with crypto advocates, tussling with lawmakers on Capitol Hill, or wrangling with other bureaucrats over who gets to set the rules of the road for investors.
Gensler’s hard-charging approach has made him one of Washington’s most recognizable figures. And halfway into his five-year term at the SEC, he has never wielded more power to affect the lives of investors. He’s been pressing to enact Biden administration priorities, which include corporate climate disclosures, tightening oversight of investment advisors, and cracking down on tech-driven consumer-focused products like Robinhood and crypto projects.
But Gensler’s over-the-top intensity has proved divisive, and critics and allies alike agree that his aggressive approach to regulation and his instincts for splashy gestures could ultimately backfire. Much of his agenda has become bogged down by opposition from the private sector and an increasingly disenchanted Congress.
To gauge Gensler’s impact, Fortune spoke with more than 30 financial experts, politicians, and current and former employees from all levels at the SEC and Commodity Futures Trading Commission (CFTC), including agency leaders. Many of them would speak only on background, given the immense influence that Gensler wields in D.C.—and the reality that he still either regulates or manages many of them.
What emerges is a portrait of a leader whose drive is unquestionable—but who many fear may be driving his agency in the wrong direction. “If you never lose, then you’re not pushing the boundaries as far as you possibly could,” says Lee Reiners, a lecturing fellow at the Duke Financial Economics Center and a Gensler admirer. But a recently departed SEC staffer expresses a darker mood, describing unrealized ambitions and conflict at the agency: “That pressure and frustration builds up,” says the staffer.
‘A god’ at the CFTC
In late 2008 the U.S. was reeling from the Great Financial Crisis, and President Obama turned to Gensler to fill a big job. Obama tapped him to lead the CFTC—an obscure agency that was being asked to tame the esoteric financial derivatives that had helped fuel the market meltdown.
At first glance, Gensler looked like a hallmark Washington revolving-door pusher—a wealthy banker jumping over to government to help his former colleagues. He had joined Goldman Sachs in 1979 after earning a Wharton MBA at just 21 years old, later becoming one of the youngest partners in the bank’s history. He had previously served in government, but at the Clinton administration’s Treasury Department, in an era of deregulation. This background made him anathema to progressives; Bernie Sanders was among the senators who held up his nomination for nearly five months.
In response, Gensler leaned on one of his superpowers: He picked up the phone. Tyson Slocum, the energy program director of the left-wing consumer advocacy organization Public Citizen, was surprised to find himself on the other end. Gensler spent two hours pleading his case at Slocum’s Dupont Circle office. Before long, he had Slocum’s endorsement. When Slocum got pushback about Gensler from other progressives, he would answer, “None of you have taken the time to meet with Gary Gensler personally.”
Sanders ultimately relented on Gensler’s nomination, and Gensler soon helped sculpt a key provision in the landmark Dodd-Frank Act that granted the CFTC broad powers. He would spend the next five years on an aggressive campaign to institute dozens of new rules. Far from being a Wall Street crony, he remade himself as a scourge of the financial world. As one staffer who joined the CFTC right after Gensler puts it, “He was a god.”
Several people close to Gensler say that the death of his wife, in 2006, caused him to reevaluate his priorities as he found himself alone with three daughters to raise. In a Time profile in 2012, Gensler recounts begrudgingly washing his eldest’s duffel bag of dirty clothes after she returned home from a trip. (Gensler has not remarried.)
Sitting down with Fortune on the sidelines of a financial technology conference in Washington, however, Gensler dismisses the idea that his convictions about regulation have changed. When he worked at the Goldman mergers department, he says, clients saw him as a resource for compliance—in a positive way. “This is a good thing, that we actually have some rules of the road,” he remembers thinking.
Gensler still speaks with the drawn-out vowels retained from his childhood in Baltimore, where his father supplied cigarettes and pinball machines from which the young Gensler would help collect the nickels. He and his twin brother both earned college degrees, unlike their parents. Gensler taught an undergraduate class in accounting at Penn at age 20, a decision by the university that he wryly describes in hindsight as malpractice. “He is an Energizer Bunny,” says Bartlett Naylor, a financial policy advocate at Public Citizen. “It’s clear that he is the bright light among even other lights.”
Still, that energy wore on his associates at the CFTC. Gensler pushed the traditionally nine-to-five agency to adopt Wall Street hours, much to the chagrin of career bureaucrats. One longtime staffer recalls how Gensler—frugal despite his riches earned at Goldman—finally bought a new car after his late wife’s station wagon was no longer safe for the road. Gensler’s daughters set up Bluetooth in the new ride, creating a nightmare scenario for colleagues. “You couldn’t get him off the phone,” the staffer tells Fortune. “After a while, your arm would get tired just holding the phone.”
Gensler’s time at the CFTC was also marked by an overreaching ambition and a take-no-prisoners approach that would foreshadow his SEC tenure. In one episode, he alienated bankers at home and abroad by implementing what became known as the “elevator bank” advisory, which expanded the agency’s supervision of overseas transactions. While Gensler and others defended the advisory as an overdue improvement, the move “burned bridges with international counterparts,” says one former CFTC regulator. “He left kind of a dumpster fire for everyone else to clean up.”
Agency veterans also say that in his push to cement the CFTC’s authority, Gensler barreled ahead with initiatives before securing the money to pay for them—particularly on the real estate front. Gensler signed leases across the country, assuming he would be able to fill the offices with new staff. The CFTC’s office space increased by almost 75% over his five-year term. But Congress never approved the fountains of cash that would fill the cubicles with staffers. A Government Accountability Office report from 2016 showed that at that time, 20% of the agency’s Washington headquarters, 32% of its New York offices, and nearly 60% of its Kansas City offices were unoccupied.
Current CFTC regulators point to still-empty office space in D.C. as Gensler’s legacy, telling Fortune that staffers joke the barren halls are “Gensler’s gift to us.”
Gensler joined Hillary Clinton’s 2016 presidential campaign as chief financial officer soon after leaving the CFTC. But well before Clinton lost to Donald Trump, peers noticed how cozy Gensler had become with Sen. Elizabeth Warren—earning the title “Elizabeth whisperer” from one Clinton senior staffer. Warren, a working-class Oklahoman turned Harvard law professor, had soared to political prominence with her searing populist critiques of the financial system, and she and Gensler had both worked to draft Dodd-Frank.
Four years later, Warren lost in the Democratic primaries to Joe Biden, but she seemed to win the battle over regulation, pushing the nominee to adopt her combative stance toward Wall Street and banks. Some sources say that Gensler and Warren have molded the Biden administration’s approach to financial regulation—the more so since Biden tapped Gensler for SEC chair just before his inauguration.
It’s a post that many view as a consolation prize. The running rumor in D.C. is that Gensler has had his eyes on becoming Treasury secretary since the Obama administration. That assumption was repeated in nearly every interview with Fortune, although always tip-toed around by his allies. “Gary is singularly focused on being the best SEC chairman ever,” says one, Dennis Kelleher, head of the progressive think tank Better Markets. “I’ve never talked to him about [Treasury].” (Gensler has never publicly expressed a desire for the job.)
But even without cabinet-level authority, helming the SEC has enabled Gensler to dive into bigger markets—with a much bigger staff, and much bigger targets.
Crypto combat
“Though you might think otherwise, I don’t spend the majority of my time on crypto,” Gensler says in an interview. He’s ribbing Fortune for its coverage of his battles with the industry—but laypeople could be forgiven for believing Gensler was all crypto, all the time.
After his stint on the Clinton campaign, Gensler was invited to teach a class at MIT. He noticed there were none offered on blockchain. “Somebody should do that,” Gensler recalls thinking, and in 2018 he became that someone. “I did my best to try to teach it from the middle,” Gensler says. “Not being a Bitcoin maximalist or a Bitcoin minimalist.”
Many crypto acolytes were able to audit the course, which a faculty member recorded and posted to YouTube. Gensler dived into the technical aspects of blockchain and explored the legal implications of the technology and its potential impact on investors. He came across as evenhanded and curious, and his elevation to the SEC prompted hope in some circles that he’d be forward-thinking about crypto.
Gensler’s attitude changed, however, once he took office. In the interim, during the COVID-19 pandemic, a new generation of speculators jumped into crypto: Bitcoin and other coins soared in value, and predatory schemes multiplied as the hype grew.
The SEC became noticeably more antagonistic after that bubble burst and major crypto projects like Terra, Celsius, and FTX collapsed in 2022. It launched lawsuits against celebrities like Kardashian for promoting crypto projects without disclosing that they were being compensated. It also sued Coinbase and other exchanges that had believed they were playing by the book; the SEC argued they were offering cryptocurrencies that were not registered as securities, among other offenses.
Gensler says these actions clearly fall under the SEC’s protective mandate. “There’s a lot of people trying to sell a better future to investors, even though [crypto advocates] really haven’t shown many uses in this field,” says Gensler. “You see company after company, entrepreneur after entrepreneur, misleading the public, going bankrupt.” He often invokes Franklin D. Roosevelt, under whom the SEC was founded, citing that president’s goal of “complete and truthful disclosure” to rein in a lawless securities market after the crash of 1929.
“You see company after company, entrepreneur after entrepreneur, misleading the public, going bankrupt.”
Gary Gentler, chair of the SEC, on why his agency has been quick to litigate against players in the crypto industry
But Gensler’s delight in taunting opponents on social media doesn’t have a New Deal precedent. (Nor does the zeal with which crypto entrepreneurs and advocates—many of them meme lords in their own right—fire back.) Gensler regularly posts jabs at the crypto industry and its cartoonish villains. On Halloween, he tweeted a crypto in-joke: “If Satoshi Nakamoto went as Satoshi Nakamoto for Halloween, would we be able to tell?” (We could explain, but…ask your kids.) He then said that crypto companies “tricking” investors should start “treating” them to legal compliance. When we talk a couple of weeks later, he proudly says that he came up with the idea for the tweet; his director of public affairs helped craft the language.
Calling out fraud, of course, is a vital function. But most crypto leaders argue they are entirely law-abiding—and they believe Gensler should create rules that help them better serve customers, rather than punishing them based on old rules that don’t fit the technology. In his first days at the SEC, Gensler told Congress he thought there should be new legislation to regulate the industry. But Congress, gridlocked as it is, hasn’t passed any.
Rushing to fill the vacuum by applying existing law, Gensler has entangled the field in a question of jurisdiction: whether cryptocurrencies are commodities, like gold bars, or securities, like stocks or bonds. Everyone agrees that Bitcoin is a commodity—it got labeled as such in 2015, before the wider industry took off. But Gensler argues that nearly every other cryptocurrency is a security, an instrument that enables people to invest in and profit from a common enterprise.
The SEC leader has the same line for crypto companies whenever he’s dragged to testify in Congress: “Come in and register” the way securities broker-dealers and exchanges do. “We don’t let the New York Stock Exchange list unregistered stocks,” says Hilary Allen, a law professor at American University. “Why should we allow a crypto exchange to list unregistered tokens?” Many in the industry find the invitation disingenuous, arguing that their novel, decentralized business models can’t conform with existing securities law.
At the same time, Gensler has hesitated to draw bright lines around specific currencies. (Talking with Fortune, he declined to articulate a position about whether the cryptocurrency Ether was a security, a waffling that one former SEC staffer says “makes the agency look stupid.”) So the stalemate continues. The upshot has been a lack of clarity for investors, especially as traditional finance embraces crypto through mainstream offerings like ETFs for Bitcoin and Ether.
The commodity-vs.-security debate has also sown discord between Gensler’s current agency and his old one. Summer Mersinger, a CFTC commissioner, cites an enforcement action against a Coinbase employee who was caught insider-trading tokens. Intending to bring a case of its own, the CFTC felt that some of the cryptocurrencies were commodities. But the agency was informed by the SEC that they would be treated as securities. Mersinger worried that courts could throw out the lawsuit because of the question of jurisdiction. “Our enforcement divisions have always had a good working relationship, but I think that’s been…more than a little bit strained,” she says.
A CFTC staffer put it more bluntly. “It’s like a horrible, dysfunctional marriage,” the person said. “Cooperation between our enforcement and their enforcement is essentially gone.”
‘I don’t want to lose’
On climate issues and in other regulatory arenas, many staffers say, Gensler has often taken a bullheaded approach, insisting that proposed rules reflect his vision and not be negotiated or watered down. This approach largely worked for him at the CFTC. But in that role Gensler had explicit authority from Congress to shake up the regulatory landscape. Now he is charting a course on his own, without a robust legislative mandate to implement.
Mary Jo White, an SEC chair during the Dodd-Frank era, says one of Gensler’s biggest challenges may be his lack of such a legislative to-do list. A mandate “can limit your discretionary bandwidth,” she says, keeping a regulator from getting sidetracked by their own agenda. (She adds, “Gary is very smart; he knows the markets, and he’s sensitive and understands the legal risks.”)
After taking the helm at the SEC, Gensler raised eyebrows with his staffing picks. He alarmed progressives by choosing a corporate defense lawyer as his enforcement chief, who quickly resigned. For other appointments, he veered in the opposite direction, hiring staffers with backgrounds in politics, advocacy, and academia. Career employees weren’t pleased. “It reflects the Elizabeth Warren approach to things—very skeptical about industry insiders having a role in regulation,” says one former SEC regulator.
Gensler’s team has scored wins on certain rules, most notably on how advisors for private funds—which include hedge funds, venture capital, and private equity—have to disclose information to their investors. But his most divisive focus has been climate disclosures, a major priority of the Biden administration. Under a proposed rule developed by Gensler’s SEC, public companies would have to account for their emissions, as well as looming climate-related risks. “We do have an important role in helping to ensure that public companies make full, fair, and truthful disclosure about the material risks they face,” Gensler said in a speech in July.
One former SEC staffer recalls that Gensler held a meeting on climate change during his first weeks in office. “I don’t want to be sued,” he told the gathered employees. “You’re going to be sued,” his general counsel replied. “Well, I don’t want to lose,” said Gensler.
Win or lose, Gensler will certainly wind up in court. Politicians and industry argue that the climate rule goes far beyond the SEC’s scope. The rule requires some companies to report indirect emissions, caused by their supply chain—further than even some eco-friendly companies are currently prepared to go. “[The SEC hasn’t] finalized that rule because I think they recognize it’s vulnerable to legal challenge,” says Reiners, the Duke lecturer. “They bit off more than they could chew in an attempt to appease the progressives.”
Indeed, finalizing rules has turned into a headache for Gensler. According to the Securities Industry and Financial Markets Association, Gensler issued 62% and 91% more rule proposals, respectively, than his two most recent predecessors in his first 30 months in office—ranging from how broker-dealers can use predictive analytics about clients to a partial overhaul of the U.S. trading system. Such undertakings require comment periods to solicit industry feedback, however, and Gensler’s ambition has drawn pushback from across the financial world. In August, Bloomberg reported that Gensler’s record of getting his rules adopted was the slowest in decades. (At a House hearing in September, Gensler testified that his rulemaking was part of a coherent agenda “based upon authorities granted by Congress,” and said the agency valued the public’s input.)
Still, the discord has taken a toll on SEC employees. A former staffer credits Gensler with shaking up the entrenched bureaucracy but adds that his aggressive approach chased many staffers into the private sector. Under Gensler, staff attrition rose from an average of 4% in the three years before he took over to 6.3% in 2022, although it declined back to 4.7% in 2023.
Another staffer who left under Gensler felt the chair was motivated by ideology rather than by what might work best in the industry. “I felt like I was becoming a scribe for ideas I didn’t particularly agree with,” they say. “I didn’t see the securities laws as being political.”
See you in court?
Even though he has nearly three years left in his term, Gensler’s opportunity to make an impact may be dwindling. His political capital seems to be declining, with even members of his own party ramping up attacks at congressional hearings, especially on climate and crypto. “Gary Gensler is a politician masquerading as a regulator,” says Ritchie Torres, a Democratic congressman supportive of the crypto industry and outspokenly critical of the SEC chair. Gensler’s most ambitious rules and most expansive lawsuits, meanwhile, are bogged down in comment periods and in the courts. Indeed, it’s the courts that may hold the key to Gensler’s legacy—and the future of his agency.
The judiciary system has tilted decidedly to the right of late. And the current Supreme Court, the most conservative in nearly a century, has shown a disdain for “the administrative state”—and for the authority of agencies like the SEC to exercise broad discretion in regulating business. Any lawsuits Gensler launches at the SEC, or that are brought against him, increase the risk of a court ruling that bars the SEC from wielding powers that Congress didn’t explicitly spell out. One such SEC-related case is on the Supreme Court docket this term—and some crypto advocates hope that cases involving their industry, including actions pitting the SEC against Coinbase and the blockchain firm Ripple, could soon follow.
62%
increase in financial rule proposals by the SEC in the first 30 months of Gensler’s term, compared with the same period under his predecessor
Gensler isn’t alone among current regulators in pushing these boundaries. It has been a broader strategy of the Biden administration, championed by Warren and carried out by other leaders including Lina Khan, chair of the Federal Trade Commission, to act as tough cops on the regulatory beat—including pursuing lawsuits against industry leaders. If courts quash them, the strategy could hobble regulators’ long-term goals in service of short-term wins. But the tough cops are “comfortable taking risk,” says Duke’s Reiners; Gensler is “doing exactly what Biden hired him to do.”
Whatever the outcome, Gensler continues to relish the fray. As he walked onstage for an interview at D.C. Fintech Week in November, crypto advocates in the audience held up their phones to capture a clip of their antagonist. Gensler made a veiled joke about digital currency being as old as the telegraph. The crowd glared back at him. He was just getting warmed up and appearing to enjoy every minute of it.
Quick wins, then drawn-out battles
Since becoming SEC Chairman in April 2021, Gary Gensler has proposed a flurry of rules at a pace that far exceeds that of his recent predecessors. Some of these proposals have already been implemented, including those concerning mutual fund fees and cybersecurity disclosures. But the majority have not—and some of Gensler’s biggest swings risk being bogged down or wiped out in court.
Climate change
Gensler’s most high-profile initiative would require companies to file detailed and wide-ranging disclosures about their environmental emissions. That mandate dovetails with the Biden administration’s push to address climate change, but it has sparked a furious pushback from industries that claim such a rule would be onerous and unconstitutional. While Gensler did pass a rule cracking down on corporate “greenwashing,” the fate of the much larger climate rule looks precarious at best.
Trading rules
The SEC chair is on a collision course with Wall Street over rules to overhaul trading systems that some say contributed to excesses of the 2021 meme stock mania. The most controversial is a proposal to replace so-called payment for order flow, which helps brokerages subsidize lower trading commissions, with a new auction system. The likes of Charles Schwab and NYSE have mounted a vigorous opposition.
Crypto
Gensler has succeeded in taming the industry’s wildest excesses with a widely publicized series of lawsuits. Some big players—notably the trading exchange Coinbase—are pushing back in court, filing challenges that seek to limit the SEC’s jurisdiction. Litigation over this issue and others could short-circuit Gensler’s broader agenda, if such suits lead to judicial rulings that curb the agency’s powers.
A version of this article appears in the December 2023/January 2024 issue of Fortune with the headline, "Comfortable in the hot seat."
