Overview
Caroline Crenshaw walked out of the SEC on January 2, 2026, leaving the agency with three commissioners—all Republicans—for the first time in nearly two decades. She was the lone vote against Bitcoin ETFs, the single dissent on 13 crypto approvals, and the industry's most consistent obstacle. Her departure didn't just tilt the commission. It erased the opposition.
Under new Chair Paul Atkins, the SEC has dismissed 60% of its crypto enforcement cases, dropped lawsuits against Coinbase and Kraken without penalty, and is now launching an "innovation exemption" in January 2026 that will let crypto firms test products under lighter requirements. After four years of Gensler-era crackdowns that brought 125 enforcement actions and $6 billion in penalties, the agency has executed a 180-degree turn—from enforcement-by-prosecution to facilitation-by-exemption.
Key Indicators
People Involved
Organizations Involved
The nation's primary securities regulator, now caught between investor protection and innovation.
A grassroots-style advocacy group that rates politicians and mobilizes voters on crypto issues.
Timeline
-
Caroline Crenshaw officially departs SEC
LeadershipLast Democratic commissioner exits, leaving all-Republican panel for first time since 2008.
-
Atkins announces innovation exemption launching January 2026
RegulatorySEC Chair confirms innovation exemption allowing crypto firms to test products under lighter requirements, using existing authority without new legislation.
-
Atkins unveils Project Crypto
RegulatoryChairman presents token taxonomy treating network tokens as commodities, not securities.
-
Paul Atkins confirmed as SEC Chair
LeadershipFormer commissioner with $6M crypto holdings takes charge, promising innovation-friendly regulation.
-
SEC drops Coinbase lawsuit, no penalties
LegalAgency dismisses case with prejudice, validating Armstrong's confrontational strategy.
-
SEC creates Crypto Task Force
RegulatoryUyeda taps "Crypto Mom" Hester Peirce to lead regulatory framework development.
-
Gensler departs, Uyeda becomes acting chair
LeadershipFour-year enforcement era ends; first Asian Pacific American commissioner takes helm.
-
Democrat Lizárraga resigns from SEC
LeadershipCommissioner cites wife's illness, leaves Republicans with 3-1 majority.
-
Senate scraps Crenshaw reconfirmation vote
PoliticalBanking Committee cancels confirmation hearing after intense industry lobbying.
-
Crypto industry mobilizes against Crenshaw
PoliticalStand With Crypto generates 107,000 emails; Armstrong calls her "worse than Gensler."
-
SEC approves Bitcoin ETFs 3-2
RegulatoryGensler joins Republicans to approve 11 spot Bitcoin products; Crenshaw and Lizárraga dissent.
-
SEC sues Coinbase as unregistered broker
LegalAgency alleges largest U.S. exchange illegally combined exchange, broker, and clearing functions.
-
Gary Gensler becomes SEC Chair
LeadershipFormer MIT blockchain professor takes helm, begins aggressive crypto enforcement despite tech background.
-
Hinman declares Ethereum isn't a security
RegulatorySEC official William Hinman said current Ether sales aren't securities due to network decentralization, setting precedent.
Scenarios
Congress Passes Market Structure Bill, Crypto Gets Clear Rules
Discussed by: Senate Banking Chair analysis, crypto policy analysts giving 50-60% odds
Senate Banking Committee finalizes bipartisan market structure legislation in early 2026, creating clear CFTC jurisdiction over spot commodity tokens and SEC authority over securities tokens. The GENIUS Act's stablecoin framework gets fully implemented by July deadline. Combined with Atkins' Project Crypto, this gives the industry the regulatory clarity it's demanded for years. Major exchanges list hundreds of new tokens. Enforcement becomes predictable and rare. The open question: whether the pendulum swung too far from investor protection.
Democratic Commissioner Appointed, Atkins Agenda Slowed
Discussed by: Legal scholars noting statutory partisan balance requirement, Senate precedent
Federal law caps same-party commissioners at three of five. Senate Democrats invoke precedent requiring paired appointments and force Atkins to accept a Democrat before naming another Republican. The new commissioner resurrects Crenshaw-style skepticism, dissents loudly on every major crypto approval, and slows Project Crypto implementation. What would have been a rubber-stamp era becomes contested territory. The commission's 3-1 Republican tilt survives, but the blank-check moment ends.
Crypto Crash Triggers Backlash, Enforcement Returns
Discussed by: Consumer protection advocates, comparison to FTX collapse aftermath
A major stablecoin depeg or exchange failure causes retail losses exceeding FTX. Congressional hearings produce viral clips of victims testifying. Public opinion turns against crypto, and senators who backed deregulation face heat. Atkins gets forced out or reverses course. The SEC resurrects enforcement, arguing Gensler was right about investor protection. Dismissed cases get refiled. The industry's political capital evaporates overnight, and the regulatory window slams shut.
All-Republican SEC Becomes Precedent, Partisan Regulation Normalizes
Discussed by: Administrative law experts, partisan polarization scholars
The current all-Republican SEC operates through 2026 and beyond without serious challenge. Future administrations replicate the model, treating independent agencies as extensions of presidential power. The norm of bipartisan commission balance dies, replaced by winner-take-all control. Financial regulation becomes transparently partisan: Democratic SECs crack down on crypto and private equity, Republican SECs crack down on ESG and climate disclosure. Markets adjust to predictable four-year policy swings. The pretense of technocratic independence ends.
Historical Context
2007-2008 All-Republican SEC During Financial Crisis
September 2007 - January 2009What Happened
When Democratic commissioners Roel Campos and Annette Nazareth departed without replacement, the SEC operated with only three Republican commissioners—Paul Atkins, Kathleen Casey, and Chair Christopher Cox. This coincided with the worst financial crisis since the Great Depression. The undermanned, ideologically uniform commission faced criticism for missing warning signs at Bear Stearns and Lehman Brothers.
Outcome
Short term: Democratic Senate blocked further Republican appointments until Obama took office.
Long term: Episode reinforced norm that partisan balance matters for regulatory legitimacy during crises.
Why It's Relevant
Current all-Republican SEC faces similar legitimacy questions if crypto markets crash during its watch.
Bush SEC Commissioners Switch Party Registration
2000sWhat Happened
During the George W. Bush administration, two sitting Republican commissioners reregistered as independents. This allowed Bush to appoint two additional Republicans without technically violating the three-member cap, bringing total Republican or recently-Republican members to six. The maneuver exploited a loophole in partisan balance requirements.
Outcome
Short term: Bush got a more ideologically aligned commission for his deregulatory agenda.
Long term: Exposed weakness in partisan balance statute, but tactic hasn't been widely replicated.
Why It's Relevant
Shows how presidents work around partisan limits when they want regulatory control.
William Hinman 2018 Ethereum Speech
June 2018What Happened
SEC Division of Corporation Finance Director William Hinman declared that current Ether sales weren't securities because the Ethereum network had become sufficiently decentralized. The speech provided regulatory clarity crypto craved but wasn't official commission policy. Later-released emails showed Hinman consulted Ethereum founder Vitalik Buterin beforehand, raising conflict questions.
Outcome
Short term: Ethereum price rallied; industry cited speech as precedent for other tokens.
Long term: Gensler refused to treat it as binding policy, fueling industry frustration that led to current backlash.
Why It's Relevant
Atkins' Project Crypto attempts to formalize what Hinman suggested—clear categories separating commodity tokens from securities.