SEC Chair Gary Gensler recently announced that he will be resigning before President Trump takes office in January. Gensler thus continued the tradition of the SEC Chair resigning when a new POTUS takes office so that the new President can put his stamp on the agency. Commendable.
Gary Gensler’s tenure as Chairman of the Securities and Exchange Commission (SEC) was nothing if not ambitious. During his time in office, he pursued an aggressive regulatory agenda, focusing on everything from cryptocurrency oversight to environmental, social, and governance (ESG) disclosures. While Gensler’s supporters viewed this as a much-needed modernization of financial markets, a closer examination reveals that his approach often prioritized politics over practical, evidence-based policymaking.
Overreach in ESG Disclosure Mandates
One of Gensler’s hallmark initiatives was the push for expanded ESG disclosures, including requirements for companies to report on workplace diversity and environmental impacts. Gensler framed these measures as a response to "investor demand." But where was the evidence?
As I have previously noted, the best indicator of investor preferences isn’t surveys or anecdotal commentary—it’s voting behavior. When given the opportunity to vote on shareholder proposals related to ESG issues, investors largely demonstrated apathy. In 2020, for example, only a handful of workplace diversity-related proposals garnered majority support, with an average approval rate of just 32%.
Ehether you think workplace diversity or environmental stewardship have merit, the SEC’s claim that these proposals aligned with widespread investor demand was dubious at best. If investors had truly prioritized these issues, we would have seen far greater support for ESG proposals in shareholder meetings. Instead, Gensler advanced what often seemed like a political agenda under the guise of responding to investor interest.
Uncertainty in Cryptocurrency Regulation
Another area where Gensler’s tenure was marked by controversy was cryptocurrency regulation. Gensler publicly stated his intent to bring cryptocurrencies under greater regulatory control, labeling many tokens as securities and pursuing enforcement actions against major players in the industry.
Rather than working with Congress to establish clear legislative guidance on cryptocurrency, the SEC under Gensler relied heavily on enforcement to set de facto policy. This led to accusations of regulatory overreach and unpredictability, creating an environment where companies were unsure of the rules and increasingly wary of innovation in the United States.
Critics of Gensler’s approach argued that this strategy stifled the burgeoning crypto sector, pushing innovation offshore while failing to provide the regulatory clarity that investors and companies needed. Instead of fostering growth and accountability, the SEC operated through ambiguity, leaving both markets and consumers worse off.
A Pattern of Questionable Justifications
What tied these issues together was a troubling pattern: Gensler’s SEC often relied on questionable justifications for its actions. In the case of ESG disclosures, the purported investor demand didn’t hold up to scrutiny. In the case of crypto enforcement, the SEC claimed to be protecting investors, yet its actions left retail participants with little guidance and fewer options.
This approach was emblematic of a broader problem with Gensler’s leadership style—an overemphasis on expanding regulatory power without sufficient regard for its practical implications. Regulation for its own sake is not regulation that works.
A Call for Evidence-Based Policy
The SEC plays a critical role in protecting investors, maintaining fair markets, and fostering capital formation. But to be effective, its policies must be rooted in evidence and aligned with the needs of market participants. Gensler’s tenure too often prioritized headlines over results, politics over substance.
A better path forward would focus on pragmatic reforms that respond to demonstrable investor needs, not political trends. It would involve working with Congress to modernize outdated regulatory frameworks rather than relying on enforcement to legislate from the executive branch. And it would require the SEC to acknowledge the limits of its mandate, rather than overstepping in ways that risked damaging the very markets it sought to protect.
As Gensler departs the SEC, it is worth reflecting on whether the agency’s priorities during his leadership truly aligned with those of the investors and companies it served. In many cases, the answer appears to have been: no.
