Time to end SEC, says trading titan Don Wilson

After protracted battles with the Securities and Exchange Commission and the Commodity Futures Trading Commission, the head of one of the world’s biggest trading firms says its time to rethink the entire US securities industry regulatory framework. 

“Friction between the SEC and the CFTC is just an ongoing counterproductive force,” Donald R. Wilson, founder of the Chicago-based proprietary trading powerhouse DRW Holdings LLC, said in an interview. “It’s time to just start from scratch, to actually get rid of both the CFTC and the SEC and create an entirely new regulator.” 

How to best oversee the industry has been at the forefront of discussion among industry participants since Donald Trump’s presidential election victory. The crypto sector has rallied around Trump, with executives saying that they were hindered during the Biden administration by a lack of clarity by regulators such as SEC Chair Gary Gensler, who Trump vowed to fire on day one of his second term. Gensler has announced his resignation. 

The SEC sued DRW’s Cumberland crypto unit last month, saying it was operating as an unregistered securities dealer in more than $2 billion of digital assets. The Cumberland allegations represented the latest in a string of enforcement actions brought by the SEC against the crypto industry in recent years. Companies including Kraken, Coinbase, Consensys and Uniswap have all been targets of warnings or lawsuits, with some still engaged in legal proceedings. At the crux of the dispute is what assets the SEC deems as securities and has regulatory authority over. 

This isn’t the first battle between Wilson, who disputes the SEC allegations, and Gensler. DRW had a years-long legal battle with the CFTC, headed at the time by Gensler, over market manipulation allegations. In 2018, DRW emerged victorious in the dispute.  

“Gary has launched a bunch of counterproductive litigation, almost kind of like he just wanted to get some of these things out there on his way out the door [leaving] some nice presents behind for the next SEC chair to unwind,” Wilson said. “But I mean, these are not good uses of SEC resources or taxpayer dollars or anybody’s time.”

The idea of merging the CFTC and SEC isn’t new. In 2012, former Reprentatives Barney Frank and Mike Capuano introduced legislation to merge the agencies, citing the separation of the two regulators as “the single largest structural defect” in the US regulatory system.

Crypto proponents have picked up on the idea in recent years. In 2022, a Senate bill was introduced to transform the CFTC, which is the main US derivatives regulator, into the top crypto watchdog. The CFTC’s purview is now mostly limited to crypto derivatives. At the time, opponents of the proposal raised concern that the smaller agency wouldn’t be able to handle the additional responsibilities adequately.

DRW, founded by Wilson in 1992, trades a wide range of financial instruments including fixed income, options, derivatives, energy futures and agricultural commodities. The firm launched Cumberland in 2014, which began with mining and later became one of the biggest market makers in cryptocurrencies trading.

A DRW spokeswoman said the firm made “good-faith efforts’ to comply with SEC rules and was frustrated by the SEC’s allegations.

Gensler announced last week that he will resign from the SEC on Jan. 20, the date when Trump is set to be sworn in. While it’s unclear what his resignation means for the SEC’s pending litigation, Wilson said he hopes the incoming chair will look at the cases with fresher perspectives.

“I think that a new SEC chair coming in will be a good opportunity for that person to kind of re-examine what the SEC is doing here,” Wilson said.