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Welcome to the On the Margin Newsletter, brought to you by Ben Strack and Casey Wagner. Here’s what you’ll find in today’s edition:

• After an SEC leader focused on crypto-related enforcement actions stepped away, we look at what happened under his tenure.   

• What to watch for on the macroeconomic front during a week in which various Federal Reserve regional presidents are set to speak publicly. 

• The SEC has followed up with firms vying to launch spot ETH ETFs, and the feedback looks encouraging.

SEC crypto enforcement leader steps away

The guy who led the crypto assets and cyber unit in the SEC’s enforcement division for nearly the last two years has stepped away.

In a LinkedIn post about the exit, David Hirsch noted he was “particularly proud of the historic work” done by that team. 

Historic is certainly one way to put it. 

Hirsch’s previous posts highlight some of the many crypto-related SEC enforcement actions taken during his tenure. 

A press release from August 2023 discusses the SEC charging an ex-New Jersey correctional police officer for allegedly raising money via an unregistered Blazar Token offering. Another post, just weeks later, focuses on the SEC claiming fraud against SafeMoon for allegedly selling a crypto security (also deemed to be unregistered).

But a bigger splash than those happened earlier in 2023 — when the US securities regulator came after crypto exchange giants Binance and Coinbase in back-to-back lawsuits.

Hirsch took the stage at a conference run by the Digital Assets Council of Financial Professionals not long after. Almost exactly a year ago now, I recall sitting in the crowd a few dozen feet from him, almost astonished to see an SEC leader in the flesh. 

We often see Chair Gary Gensler and Commissioner Hester Peirce in the public eye, sure. But other than that, a journalist’s exposure to the agency is often limited to press release headlines and/or vague SEC spokesperson responses in his or her inbox (if not straight up declining requests for additional information). 

Hirsch said during the DACFP discussion that while the SEC was not looking to drive crypto offshore, it would keep “pursuing claims for the unregistered offer and sale of securities.” 

Many have accused the SEC of failing to define clear rules for crypto companies, instead resorting to what they call regulation by enforcement. Hirsch said last year that the SEC has made a “sincere effort” to provide guidance where it can, but added: “we’re not your lawyers.”

The agency’s approach under Hirsch has been two-pronged. For one, it has pursued on the enforcement side what it viewed as fraudulent and unregistered activity in the crypto space, noted Arie Heijkoop, a partner at law firm Haynes Boone. 

The SEC has also seemed to engage more with issuers looking to offer crypto products, as evidenced by milestone decisions on spot bitcoin and ether ETFs, he added. Those approvals, however, came only after the SEC’s legal loss to Grayscale Investments.

“It has not necessarily softened the SEC's enforcement vigor in this space,” Heijkoop said of the post-suit progress.

After all, the SEC just last month issued Robinhood a Wells notice (typically used to inform potential subsequent enforcement actions) in relation to its crypto business. 

An SEC spokesperson did not share with Blockworks who would replace Hirsch. And the former agency leader declined to comment on his next role.

Heijkoop told Blockworks he doesn’t expect Hirsch’s replacement to depart from Gensler’s crypto-skeptical approach. 

A Coinbase spokesperson said Monday: “History will not look back favorably on this era of regulation by enforcement by the SEC.” The SEC’s legal battle with the exchange trudges on.

Still, Hirsch is proud of the work he and his team did, showing it’s all a matter of perspective.

It kind of reminds me of that Rihanna song — if for no other reason than the out-of-context lyrics:  

“That was quite a show
Very entertaining
But it's over now
Go on and take a bow.”

While Hirsch is gone, it’s very possible the SEC’s hyper-vigilant mistrust of the space will persist until more crypto policy progress is made in DC.

— Ben Strack

The asset amount investors pulled out of 10 US spot bitcoin ETFs last week, Farside Investors data shows. It’s the highest weekly outflow total for the category in about three months.

This was a stark reversal from the week before — when the funds brought in about $1.8 billion. The outflows were “likely due to a more-hawkish-than-expected FOMC meeting,” CoinShares research head James Butterfill said in a Monday report.

The Fed chose to hold interest rates steady on June 12 despite the European Central Bank and The Bank of Canada lowering rates the week prior.

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Even with markets closed Wednesday for the Juneteenth federal holiday, there are still notable growth-related metrics and potentially impactful speakers coming up. Here’s what we are watching:

• There will be no shortage of Fed official communications. We have four regional presidents (Richmond, Dallas, St. Louis and Chicago) speaking Tuesday before the Philadelphia Fed Manufacturing Survey drops on Thursday. May’s report showed a significant weakening from April, with the index falling from 15.5 to 4.5. It’s typically a volatile report, but a solid print for June is never going to be a bad thing.

• Also on Thursday we have the weekly jobless claims drop. Last week came in ahead of expectations at 242,000 initial claims. Analysts are expecting the figure to come in at 236,000 this time around. We need to see numbers back in the low-200,000 range to maintain faith in the labor market (and the rate cut schedule). 

• On Friday, the Conference Board Leading Economic Index for May is slated to publish just after markets open. Over the past six months, the headline figure has contracted by 1.9% — showing significant headwinds, though not signaling a recession. May is expected to show LEI decreasing by around 0.4%, up slightly from April’s read of -0.6%.

— Casey Wagner

After what seemed like a quieter week than expected for prospective spot ether ETF issuers, the SEC ultimately followed up about their amended filings. 

In case you’ve successfully avoided the housing market by residing under a rock this past month (more power to you!), the SEC is still working with fund groups to finalize the ETH ETF paperwork. 

The regulator had approved the 19b-4s submitted by exchanges last month in a milestone decision. But sorting out the so-called S-1s — and letting those go effective — is the other step necessary before the first US spot ether ETFs can begin trading. 

Issuers received comments on the S-1s on Friday, Bloomberg Intelligence analyst Eric Balchunas said on X.

A source familiar with the filings confirmed this to Blockworks on Monday. Suggested revisions were “light,” the source added. A separate person (also close to the process) noted a deadline of June 21 to address the feedback. 

“We would characterize the comments we received as reasonable and look forward to approval in the near term," that second source said.

None of this is particularly surprising. Still, a separate source had told Blockworks last week they had expected comments on the S-1s by June 7 — a date that came and went without issuers hearing from the SEC. So the movement appears promising for those worried the agency may have been dragging its feet. 

SEC Chair Gary Gensler said in a hearing last week that he expected SEC staff to finalize the registration statements “sometime over the course of the summer.” The season’s last day isn’t technically until Sept. 22.

But the date Bloomberg analysts are watching is July 2, noting the SEC could look to wrap this up before the holiday weekend.

Will Independence Day fireworks shoot off before or after we get word that ether ETFs are ready to go? It won’t be long before we find out. 

— Ben Strack

• Bitcoin rose above $67,000 Monday afternoon after trading closer to $65,000 earlier in the day. BTC stood at roughly $67,200 at 2:30 pm ET — up nearly 1% from 24 hours ago, but down 3.5% over the past week.   

• Shareholders last week voted in favor of Elon Musk’s $47 billion compensation package as Tesla CEO, going against what a Delaware judge ruled in January. While we expect Tesla to ask the court to reconsider, the process could take months to resolve.

• Crypto exchange Coinbase’s venture arm has a 4% share in all crypto investments since 2017, with 443 total investments, Bloomberg reported over the weekend.