On the Margin Newsletter: Trump has crypto supporters, but what’s his plan for the SEC?

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Welcome to the On the Margin Newsletter, brought to you by Casey Wagner and Ben Strack. And, oh yeah — happy Friday! Here’s what we unpack today:

Trump might hate Gensler, but could he (if elected) actually fire the SEC chair?
A look at a Canadian firm’s Solana ETP bid to keep the country’s “innovation hub” status alive.

You’re fired! (Maybe…)

Former President (and newly convicted felon) Donald Trump has been busy aligning himself with the crypto industry these past few weeks. As more crypto big shots voice support for him, we started thinking about what a Trump second term would actually look like for the industry.

We know Trump has expressed dissatisfaction with SEC head Gary Gensler. But should he move back into the White House in January, Gensler would still have 17 months left in his term.

The question becomes: Could Trump end Gensler’s term early?

The general consensus seems to be that the president does not have the power to remove an agency head — at least not without good reason. Neither the Constitution nor the Securities Exchange Act of 1934 grants this power, and there are a number of court cases that set this precedent.

A 2008 DC Circuit court ruling stated that commission members are only “subject to removal by the president for cause.”

(Cause here, as defined by the court, means: “inefficiency, neglect of duty, or malfeasance in office.”)

This opinion was upheld by the Fifth Circuit in 2022 in SEC v. Jarkesy et al., which eventually made its way to the Supreme Court and is now pending a ruling.

The issue came up in John McCain’s 2008 presidential campaign, when he said he would fire then-SEC Chair Chris Cox. The media and public largely agreed that McCain was mistaken, arguing that the president had no such power. FactCheck.org even sided against the then-presidential hopeful.

But not all legal experts agree.

In an amicus brief filed with the Supreme Court in SEC v. Jarkesy, George Mason University scholar Andrew Vollmer argued the president actually does have the power to remove SEC commissioners, even without good reason.

While Article II does not expressly give the president this power, it also does not expressly restrict it, Vollmer said. So, according to him, firing is fair game.

McCain of course never had the opportunity to challenge the apparent “rule” as president, but Trump just might.

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We know he’s never been one to shy away from rocking the boat. Plus, he’s probably been itching to say, “You’re fired” since The Apprentice wrapped in 2017.

Last month, Trump became the first former US president to become a convicted felon when a New York jury found him guilty of 34 counts related to an alleged hush money payment and attempt to influence the 2016 election.

Trump’s sentencing is slated for July 11, though legal experts have said his sentence will likely be stayed pending his appeal — which could take a year.

Trump has also been indicted in three separate cases related to alleged election interference and retention of classified documents. In total he has been charged with 54 additional felonies.

— Casey Wagner

$64,000

The level below which BTC’s price fell Friday. In fact, it dropped as low as about $63,350 for the first time since May 15, according to CoinGecko data.

BTC — down more than 9% from a month ago — is still up about 50% year to date. The asset hit a record price above $73,000 in March.

While a number of industry watchers have said they expect macro forces to push BTC to new all-time highs in the coming months, it might not break out of its current range until the Fed cuts rates or the US presidential election wraps up.

A deeper look at Canadian firm’s SOL ETP bid

What happens in Vegas stays there (you hope).

But the ETF innovation in Canada seems to head south, even if it takes a while. That means American investors interested in crypto product progress best keep an eye on their northern neighbor.

Enter 3iQ, the Canadian fund group leading the country’s SOL product charge. The company, which revealed Thursday it was looking to list the first Solana ETP in North America, is no stranger to working with regulators and getting crypto products approved.

3iQ launched bitcoin and ether ETPs in 2020. These were closed-end vehicles offering a fixed number of shares — unlike the open-end crypto ETFs now prevalent around the world (Canada and US included) that create and redeem shares based on market demand.

The perhaps better-known spot bitcoin and ether ETFs (open-end) came to Canada in February 2021 and April 2021, respectively.

It wasn’t until three years later that the SEC approved US spot bitcoin ETFs (also open-end), and now ether ETFs appear poised to launch on American exchanges in the near-term.

The latest 3iQ filing “kicks off the formal conversations” on Solana with Canada’s Ontario Securities Commission (OSC), 3iQ Digital Assets president Chris Matta told Blockworks.

The firm worked with the regulator to have two of its ETH ETPs start staking ether last year, and the SOL ETP would also stake its holdings.

Why file for this now? Well, for one, Solana’s roughly $60 billion market cap is similar to ETH’s market cap when 3iQ launched its Ether Fund in 2020, Matta noted.

“We feel like Solana’s at that stage of maturity,” he added. “It has the track record, has the size and scale, and has the demand that now makes it a good time to bring to market.”

It’s important to note this planned SOL ETP would also be a closed-end fund. This makes it a bit more similar to a Grayscale trust — though it has a mechanism that keeps premiums and discounts from straying too far from the net asset value.

Its shares would also trade on the Toronto Stock Exchange rather than OTC Markets Group — where Grayscale Solana Trust shares are listed, for example.

But nothing is happening immediately.

It could take several months before the OSC rules on the SOL ETP, Matta guessed. Full-blown, open-end Solana ETFs likely wouldn’t come until there is a regulated solana futures market — a prerequisite the SEC has previously pointed to for BTC and ETH funds.

While the Chicago Mercantile Exchange began offering bitcoin and ether futures in 2017 and 2021, respectively, none yet exists for SOL — a reason US issuers likely haven’t filed for solana ETFs yet.

Let’s also mention that Solana staking ETPs already trade on European exchanges. One by 21Shares manages roughly $770 million in assets.

But on this side of the Atlantic, the Great White North looks to maintain its lead over Uncle Sam.

“We’re kind of at a crossroads where the US has caught up to where Canada is,” Matta said. “Is the US going to surpass Canada, or is Canada going to continue to innovate?”

— Ben Strack

Did You Notice

Even with markets closed Wednesday for Juneteenth, it was still a busy week for data. Here’s a recap:

The Philadelphia Fed Manufacturing Index, which measures general business activity in the region, came in much lower than expected Thursday. The headline figure for June is 1.3, compared with an expected 4.8 and a 4.3 reading from May. It’s the coolest reading since January, but it’s still a positive figure. So even while growth is slowing, at least there is some progression.
Initial jobless claims dropped slightly to 238,000 in the week ended June 15, a mild improvement from the 10-month high recorded the week prior. Continuing claims increased by 15,000 to 1.82 million. It’s not a great sign for economic growth, but claims do tend to be volatile around holidays and school breaks, so take it with a grain of salt.
The Conference Board Leading Economic Index for May dropped just after the open today, showing a decline of 0.5% from April. It’s now at its lowest level since April 2020, but the Conference Board maintains the data does not signal a recession.

— Casey Wagner

Bulletin Board

Blockchain connector LayerZero just dropped its new token, but it wants to be very clear this is not an airdrop. Branding aside, ZRO has taken a beating — down 30% since yesterday’s launch.
After a busy week of drama unfolding on X, crypto exchange Kraken’s chief security officer confirmed that CertiK has returned $3 million in exploited funds. Catch up here.
Don’t miss the latest edition of the On the Margin podcast featuring Joe McCann, who is bullish on stocks and crypto for the rest of the year. Tune in on YouTube (or wherever you get your podcasts) to find out why.

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

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