Many of Lawsuits Initiated under Gensler Will be Dropped: Billionaire Investor Mike Novogratz

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Billionaire investor Mike Novogratz believes many of the lawsuits brought under current Securities and Exchange Commission Chair Gary Gensler will be dropped. 

In a recent interview with Forbes, Novogratz highlighted the inconsistencies in the SEC’s approach to regulating crypto assets, referencing the recent legal battle over a Bitcoin exchange-traded fund (ETF). 

He pointed out that the court criticized the SEC for denying a spot Bitcoin ETF while allowing futures ETFs, exposing the illogical reasoning behind the decision.

The crypto veteran said that regardless of the political affiliation of the next SEC chairperson, there is a likelihood that many of the lawsuits initiated under Gary Gensler’s tenure will be dropped. 

“Looking ahead, regardless of the political affiliation of the next SEC chairperson, there’s a likelihood that many of the lawsuits initiated under Gensler’s tenure will be dropped,” he said. 

“This reflects the growing recognition of the inevitability of crypto’s integration into the financial system.”

However, he also noted the ongoing challenge of regulatory uncertainty surrounding the classification of digital assets as securities or commodities. 

The outdated Howey Test, designed for traditional securities, fails to adequately address the complexities of blockchain-based technologies, hindering industry growth and imposing financial burdens on businesses navigating the regulatory landscape.

Mike Novogratz Slams Regulatory Unclarity in the US

Novogratz also acknowledged the frustration caused by the regulatory uncertainty and the impact it has on firms that prioritize compliance and risk mitigation. 

The crypto billionaire emphasized the need for clear and comprehensive regulatory frameworks at both the federal and state levels to level the playing field and foster sustainable growth within the industry.

@GaryGensler
"President Biden and the Democrats in Congress should consider appointing a new Chair to restore the SEC's integrity with a balanced, reliable Chairman".

– Todd Tiahrt, former Member of Congress, Transportation, Treasury, Independent Agencies Subcommittee,… pic.twitter.com/c4g6hyMRqu

— Crypto Eri Carpe Diem (@sentosumosaba) February 22, 2024

Regarding the role of Bitcoin as a store of value, Novogratz discussed the growing acceptance of the cryptocurrency among registered investment advisors (RIAs) and retail investors. 

He anticipates a gradual but steady increase in bitcoin allocations within investment portfolios as RIAs recognize its potential for diversification and wealth preservation. 

This influx of capital from the traditional financial sector is seen as the next phase of Bitcoin’s evolution and a significant catalyst for its growth.

Grayscale Sees Outflows as Investors Turn to Alternative ETFs

Novogratz also touched upon outflows in the market, highlighting the scrutiny faced by Grayscale’s Bitcoin product and the shift of investors towards alternative ETFs offered by industry giants like Invesco, BlackRock, and Fidelity. 

“This shift underscores the significance of trust and cost-effectiveness in investment choices, with Grayscale’s product losing appeal to more efficient alternatives in the market,” he said. 

In terms of potential winners in the ETF market, Novogratz mentioned BlackRock and Fidelity, along with his company’s initiative with Invesco, expressing optimism about their progress in the coming months. 

While these businesses may not be highly profitable due to low fees, they offer excellent consumer products with significant potential for scalability and brand recognition.

Looking ahead, Novogratz anticipated a gradual institutional creep into the crypto market, starting with individual retirement accounts (IRAs) and extending to pension and endowment funds. 

He highlighted the broader acceptance of digital assets and bipartisan support for crypto legislation, which would encourage more investors to enter the market. 

Although growth may not mirror past frenzies, he expects significant retail demand growth over the next 12 months, driven by increased awareness of the long-term potential of crypto assets.

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