Wall Street’s top regulator is on a collision course with Robinhood, just as the brokerage’s Chief Legal Officer, Dan Gallagher, is emerging as a top contender to lead the SEC if Donald Trump regains the presidency. According to a recent Politico report, Gallagher could be a natural choice to head the agency. However, before that happens, he may find himself facing off against the SEC over Robinhood’s expanding cryptocurrency business.

The SEC is investigating whether Robinhood is operating as an unregistered broker-dealer and clearing agency in the crypto space. While charges aren’t guaranteed, a lawsuit could trigger a high-profile legal battle that would put Gallagher in an awkward position as his name is floated for the SEC chairmanship. Gallagher, a former SEC commissioner, is pushing back, arguing that Robinhood’s limited crypto offerings make the case against the company weak. “Shooting at the good guys is bad policy,” he said.

Gallagher’s potential rise to SEC chair highlights the familiar revolving door between government and industry. Other candidates being mentioned include former Commodity Futures Trading Commission Chair Chris Giancarlo, known as “CryptoDad,” and current SEC Commissioner Hester Peirce. Despite the competition, some Republicans believe Gallagher’s appointment is only a matter of time.

If nominated, Gallagher’s confirmation could be contentious, given Democrats’ long-standing concerns about industry insiders leading regulatory agencies. Robinhood’s role in the 2021 GameStop saga, when the company restricted investors from buying more shares, is still fresh in lawmakers’ minds. However, Gallagher argues that the company has since strengthened its compliance and risk management programs.

Gallagher has also been critical of the SEC’s handling of cryptocurrency regulation, suggesting the agency could have introduced clearer rules by now. While he respects current Chair Gary Gensler, Gallagher believes the two differ on key issues, particularly around crypto.

Whether Gallagher would leave Robinhood for the SEC remains unclear, though he acknowledges the “honor” of being considered for the role.

Resources:

Politico