• Representative Torres of New York (D-NY) has formally called for an investigation into the Securities and Exchange Commission (SEC).
• The approval of Prometheum’s license is regarded as problematic in the letter due to the absence of a functioning product or assets associated with the company.

In two letters released to the public on Thursday, Congressman Ritchie Torres called for two independent inquiries into the United States Securities and Exchange Commission (SEC) concerning its “reckless and overly strict methodology regarding digital assets.” The congressman alleges that SEC Chairman Gary Gensler has introduced political motives into the registration procedure by granting Prometheum a specialized broker-dealer license.

Reports indicate that Representative Torres of New York (D-NY) has formally called for an investigation into the Securities and Exchange Commission (SEC) regarding its unconventional choice to award a special purpose broker-dealer (SPBD) license to Prometheum, “a trading digital assets platform that does not trade digital assets.” Furthermore, Torres has requested a separate investigation into the SEC’s failure to establish a robust yet practical registration process for legitimate digital assets platforms.

In a written letter addressed to SEC Inspector General Deborah Jeffrey, Torres has urged the SEC to investigate what he refers to as an “unconventional behind-the-scenes agreement” that led to Prometheum receiving a unique authorization that no other cryptocurrency exchange has acquired.

SEC’s Arbitrary Approach to Crypto Regulation

Torres asserted that the SEC’s approval of Prometheum’s SPBD license demonstrates yet another instance of the commission’s arbitrary stance on cryptocurrency regulation. The recent case in which XRP emerged victorious against the SEC again brought the spotlight onto SEC’s approach to crypto regulation.

Describing the SEC as an “overzealous traffic officer” who issues speeding tickets without clear guidelines on speed limits, Torres criticized the commission for relying on a regulatory approach that emphasizes enforcement rather than effective regulation.

The correspondence from Torres arrives just one day following a letter sent by the Blockchain Association, a cryptocurrency advocacy group, to Jeffrey about Prometheum. The Blockchain Association contends that Prometheum obtained a contract from the SEC by modifying its public statements about the agency, shifting from a negative to a positive portrayal.

Suspicions Surrounding Prometheum’s SEC Relationship

In a letter addressed to the SEC’s Inspector General, the association expresses its apprehensions about potential impropriety and ethical concerns regarding the approval process. 

The letter emphasizes that there is a lack of clear regulatory guidelines on how to apply U.S. securities laws to digital assets. It also criticizes SEC Chair Gary Gensler, accusing the SEC of displaying overt hostility towards the digital assets industry. The letter cites enforcement actions and proposed rulemaking that have significantly impacted the sector.

Of particular concern is the approval of Prometheum as an SPBD, as the letter points out that other companies with what it deems “legitimate business models” have encountered denials or delays in obtaining similar licenses. This discrepancy raises questions about fairness and consistency within the approval process.

The approval of Prometheum’s license is regarded as problematic in the letter due to the absence of a functioning product or assets associated with the company, leading to further inquiries. The association doubts whether Prometheum received preferential treatment or utilized personal connections to gain an unfair advantage in the approval process. 

There is concern that SEC Chair Gensler is using Prometheum and the SPBD licensure process to hinder congressional efforts for legislation and promote a misleading narrative that the law is clear-cut regarding digital asset securities.

To address these concerns and seek clarity, the Blockchain Association has officially submitted a request to the SEC under the Freedom of Information Act. The request specifically seeks access to documents and communications pertaining to the matter in question.