A second stint for Gallagher at SEC gets crypto world's attention

As election day nears, speculation is rising about the shortlist former President Donald Trump may have in mind for SEC chair – and one name has the crypto industry buzzing: Daniel Gallagher.

Earlier this week, Politico reported that Gallagher, a Republican former SEC commissioner while former President Barack Obama was in office, “is emerging as a leading contender to head the Securities and Exchange Commission,” if Trump is again elected. With his background at the SEC, his political affability, and affiliation with the cryptocurrency world, he is “a natural choice,” the publication reported, citing an unnamed former SEC official.

Gallagher, who since 2020 has been chief legal officer at Robinhood, acknowledged the discussion around him as a contender, in a statement provided by the firm.

“It is an honor to have my name included in any discussion of who may be the next SEC chairman,” Gallagher said. “I care deeply about the agency, and my hope for any new SEC chairman would be that they foster access to the markets, and ensure the US remains at the forefront of financial innovation.”

Since Politico’s story on Monday, coverage of Gallagher’s potential candidacy by crypto asset industry publications has been extensive.

Currently, Robinhood is dealing with the SEC over its crypto business. The regulator in May gave Robinhood a Wells notice, indicative of a likely enforcement action.

“After years of good faith attempts to work with the SEC for regulatory clarity including our well-known attempt to ‘come in and register,’ we are disappointed that the agency has decided to issue a Wells notice related to our US crypto business,” Gallagher said in a statement at the time. “We firmly believe that the assets listed on our platform are not securities and we look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be on both the facts and the law.”

In this election, the crypto world is playing a big role in funding, being by far the largest industry contributor to political action committees, at more than $119 million. And there has been immense pressure on the SEC by crypto supporters to oust chair Gary Gensler, over the agency’s lengthy list of cases against crypto exchanges and other firms, as well as the SEC’s begrudging approval of spot-price crypto ETFs.

Gallagher, who was appointed by Obama and served as a commissioner from 2011 to 2015, worked at the SEC in staff roles before that. He was deputy director and co-acting director of the division of trading and markets.

Observers say Gallagher is well-respected politically, even by those with strongly differing views on regulation.

“I know Dan pretty well. He’s a good guy, but we don’t agree on much,” said Dennis Kelleher, CEO and president of Better Markets. “He’s a classic guy who you could disagree with and it’s not disagreeable.”

It makes sense that Gallagher would be on a short list to lead the SEC, but it’s too early to speculate on who will end up with the job, given the uncertainty of the election and the fact that both parties will inevitably have about 10 different candidates they’d be vetting, Kelleher said.

Gallagher is thoughtful and considers other points of view, he said, but there would be obvious challenges with him leading the agency.

 “While Dan will think he’s being unbiased and will try to be so, he will not be able to escape his strongly held views [from] when he was an industry advocate,” Kelleher said, describing a shadow that would be difficult to shake, regarding Gallagher’s likely support for crypto, payment for order flow, and other topics. “Having views like that are fine if you’re in the private sector, but it’s going to interfere with his ability to put the public first.”

Knut Rostad, president of the Institute for the Fiduciary Standard, took issue with Gallagher as a candidate for the role, given his comments opposing a prior version of the Department of Labor’s fiduciary rule.

“From the perspective of individual investors, based on comments [and] Gallagher’s prior record, it would be a total disaster,” Rostad said. “His view of ‘fiduciary’ is, at the very best, extraordinarily narrow and unclear.”

However, he could well be a candidate Trump would want, he said.

“If the next Republican administration likes what they did in their prior administration, then Gallagher is their guy, because he will have the opportunity for fiduciary duties for the retail investor to be irrelevant.”