Two years after their confirmations, there can't be any doubt that U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler and Federal Trade Commission (FTC) Chair Lina Khan share a lot in common. Both have transformed sleepy federal agencies into headline machines, sending Google trendlines for their respective offices into cardiac arrest.
They're alternately described as "hardliners" and "the new sheriff in town." They have a penchant for big cases. And yet, for all the regulatory gunslinging and New Yorker profiles, they share something else in common: poor results.
It was just last month when Gensler's SEC lost its major case against Grayscale, where a court found that the SEC's denying Grayscale permission to launch a spot-bitcoin ETF was unreasonable. The Grayscale blunder comes off the heels of the agency's loss in a case against blockchain developer Ripple.
Meanwhile, over at the FTC, Lina Khan hasn't done much better—losing high-profile cases attempting to block Microsoft and Meta acquisitions. Despite these embarrassing setbacks, Khan's FTC is readying yet another ill-advised lawsuit against Amazon, which will be an uphill effort to break Amazon's Prime subscription, a service tens of millions of Americans enjoy and use regularly.
Of course, Khan and Gensler's similarities go back further than their recent court losses. Both are two of President Biden's highest-profile regulators, and both are favorites of Senator Elizabeth Warren. Khan and Gensler have both embraced an activist sentiment that criticizes Obama-era enforcers for being too conciliatory toward industry, too willing to compromise, and too self-limiting in terms of regulatory power.
Yet, when we look at how Gensler and Khan have run their respective agencies, there's scant evidence that this new approach has yielded more protection for consumers.
Part of the reason for that is that while the cases Khan and Gensler have chosen to pursue might make headlines, they lack legal footing. Khan, for instance, overruled her staff on Meta's acquisition of the small VR company Within, while Gensler rejected staff recommendations by denying Grayscale's bitcoin ETF application. Often, the best way for agencies to police industry is to pursue new agency rules. But both leaders have also rejected issuing clear rules—Gensler has repeatedly refused to issue clear crypto rules, while Khan has deliberately made the FTC's Section 5 guidance more vague and less useful to businesses. Khan and Gensler have, on numerous occasions, rejected settlements with companies.
Furthermore, Khan and Gensler have pursued "YOLO" litigation strategies. For Khan, it has been Meta and Within, Microsoft and Activision, and Facebook's Whatsapp and Instagram deals, while Gensler's cases against Ripple and Coinbase have followed the same flawed strategy.
Finally, and perhaps most importantly, both regulators have pursued overbroad strategies that have hurt their respective agencies' long-term credibility. Gensler's crypto declarations aimed at giving the SEC broad authority over any digital assets. Similarly, Khan pushed a historically expansive view of the FTC's mandate, claiming the agency has oversight over far-afield issues like ChatGPT's training data.
Democrats must recognize that these strategies have not only failed, but they've set back progressive regulatory goals considerably through court rulings that have reduced these agencies' respective scope and authority.
Khan and Gensler's "going big" in court strategy has provoked broader challenges to their authorities, resulting in the Supreme Court and other federal courts tightening the agencies' authority—like in the Axon case and the FTC's 13b disgorgement case.
And by going to court and losing, both agencies have reduced their power to scare companies into settling. Now that both Khan and Gensler will lead their agencies into court on cases with little to no likelihood of success, companies will be more willing to take their chances in court.
Furthermore, these lofty, headline-grabbing, low-likelihood-of-success pursuits have caused both Khan and Gensler to miss the bread and butter of consumer protection and enforcement. Gensler's SEC missed the Terra Luna and FTX collapses while the agency's resources were too busy fighting Ripple and Coinbase. Similarly, Khan has been so fixated on Meta and Amazon that she even said the FTC didn't have enough money to investigate whether power companies are gouging customers.
Chairwoman Khan and Chairman Gensler have received glowing headlines for talking tough. But scratching the surface just a little, it's clear they've both racked up far fewer wins than their Obama-era predecessors while ignoring many of the consumer harms that their agencies should be confronting.