Hey! I’m Veronica Irwin, Unchained’s regulatory reporter.

There is no rose without a thorn, so they say. And on the cusp of some really good-for-crypto SEC news, I bring you some bad. 

Good: Trump has nominated a pro-crypto SEC chair, Paul Atkins. 

Bad: Crypto-critic Elizabeth Warren might end up picking a Democratic commissioner.

Warren Will Have Significant Say in Selecting the Democratic SEC Commissioner

Schumer is asking for the input from the Senate’s chief crypto critic.

Democratic party leadership is giving Massachusetts Senator Elizabeth Warren significant sway to choose who will fill the open slot for a Democratic commissioner at the SEC, according to three sources familiar with discussions inside the Democratic party. 

The SEC can only have up to three commissioners from the same party. Currently, two of the Democrats on the commission include Chair Gary Gensler and Commissioner Jaime Lizárraga, who are both stepping down in January. Trump has already nominated Republican Paul Atkins as next SEC Chair to replace Gensler. The remaining two commissioners must therefore be Democrats, independents, or members of a third party, rather than Republicans. 

The Senate Banking Committee will meet next Wednesday to decide whether or not to put forth Democratic Commissioner Caroline Crenshaw for re-confirmation, according to Fox Business, potentially filling one of those slots. Afterwards, there will still be at least one Democratic commissioner spot available. 

Warren’s power in the Democratic SEC commissioner selection process is the product of complex political horse trading, explained below. The result is that Warren’s lasting power in the Democratic party, and in SEC oversight, could ultimately hurt crypto. Warren is the harshest critic of crypto in the Senate, and has advocated for stringent regulation of the industry in the name of consumer protection and national security. In 2022, Warren was reportedly working on a bill which would have made most cryptocurrency tokens securities and handed oversight of crypto to the SEC, though a bill ultimately introduced in 2023 focused on money laundering and split the SEC’s crypto responsibilities with the CFTC. The bill never passed the Senate. 

As Democratic Minority leader next session, Chuck Schumer typically gets to pick. But by giving the power to Warren, he’s testing whether she can come up with someone moderate enough to be confirmed by a Republican-majority Senate. 

Read More: Democratic SEC Commissioner Is Stepping Down, but That Doesn’t Mean Trump Will Get 2 Outright Picks

Commissioner Selection Protocol

Procedurally, the president nominates SEC commissioners, which are subsequently confirmed by the Senate. In situations when open spots on the commission cannot be filled by members of the President’s party or of the Senate majority party, the Senate minority leader typically recommends commissioners. Oftentimes SEC commissioners of opposing parties are nominated as a pair (one Democrat and one Republican) under the expectation that Senators of either party will confirm the opposite party’s nominees. 

If this procedure is followed next year, as five legal and policy experts told Unchained they expect it will be, the process would go like this: 

1. Trump informs the Senate he intends to nominate a Republican to the commission (he already did this on Wednesday when he announced that he would nominate Paul Atkins as chair). 

2. Schumer tells Trump which Democrats he would like to see appointed to the commission to replace the Democrats who are leaving. 

3. Schumer and Trump, and majority leader John Thune make an agreement that Trump will make sure Republicans will confirm the Democratic nominee(s) in exchange for Democrats confirming Trump’s Republican nominee. 

4. Each of the nominees are confirmed by the Senate with the required 51 votes.

It is, of course, possible that Trump would forgo the historically followed protocol entirely, and pick commissioners to replace Gensler, Lizárraga, or Crenshaw without Democratic party input. There is no law requiring him to take recommendations from Schumer, and, as Digital Chamber President Cody Carbone explained on Unchained, Trump could appoint other commissioners he was considering for SEC Chair as independents.

Read More: Andy Barr’s Pitch for Financial Services Committee Chair Reaffirms Support for Crypto

However, the Senate still goes by consensus, and some Republican Senators are already frustrated with Trump’s threats to bypass their power via recess appointments, according to reports. Thus, sources who explained the dynamic to Unchained say that it is unlikely Trump will expend his political capital fighting to bypass Democrats’ input on SEC commissioners.

Schumer’s Political Calculation to Give Warren Say

Three sources familiar with internal Democratic party machinations say that Schumer is taking recommendations from Warren on which Democrats to recommend to Trump as commissioners. The reasons why are a blend of seniority and politics. 

On one hand, as a senior Senator in the Democratic party, Elizabeth Warren has accrued a significant amount of political capital amongst her peers. Over the years Warren has become a successful fundraiser, has earned the support of left-leaning think tanks and nonprofits, and a dedicated group of Democratic voters, many of whom became fans of her when she ran for the Democratic presidential nomination in 2016. She commands a certain amount of power amongst some of the most left-wing and established members of the Democratic party, and has been known to pressure more moderate members, like Schumer, to take a harsher stance on crypto. Even though money from the crypto industry, primarily via the political action committee Fairshake, cost Democrats several elections in key swing states, Warren has been denying any responsibility for giving the party an anti-crypto reputation, three sources explained. “She didn’t think she did anything wrong,” one source active in Democratic fundraising explained. “There’s a lot of Harvard arrogance there.” 

Read More: Rep. French Hill Says He’d Investigate Operation Choke Point 2.0 as Financial Services Chair

Ironically, that money from the crypto industry also gave Warren more power within the party. Fairshake donated over $40 million to unseat Democratic Ohio Senator Sherrod Brown, helping to elect Republican Senator Bernie Moreno in his place. After his defeat, Brown vacated the position of Chair of the Senate Banking Committee, which is responsible for SEC oversight, and Elizabeth Warren took his spot as the most senior Democratic member of the committee. Two sources explained that as Ranking Member, Warren is the ideological leader for Senators on banking, finance, and crypto issues, and Senators for whom these issues aren’t a priority take cues from her on how to vote. 

One of those sources, as well as an additional involved in Democratic policy conversations on crypto, said Schumer, frustrated with Warren’s anti-crypto stance, is also allowing her to have a say over the Democratic SEC commissioner selection process as a political test. 

Because Senators are unlikely to confirm a progressive SEC commissioner, these two sources say, Schumer is challenging Warren to choose someone more moderate. In effect, Schumer, a moderate, is wrestling with Warren, a progressive, to cooperate.If she won’t pick someone more moderate, Schumer is betting Warren will fail, one of these sources explained. “He can say ‘Elizabeth we tried it your way and it didn’t work; now we do it my way,” they said. “Warren is a problem for the caucus on a lot of things. It’s clear her views aren’t popular and make people angry.” 

Representatives for Schumer and Warren did not respond to requests for comment.

Related stories from Unchained:

1. Trump Taps Paul Atkins for Next SEC Chair, Making Good on His Crypto Promises

2. David Sacks as A.I. & Crypto Czar? Why the Industry Was Surprised

3. South Dakota Rep. Dusty Johnson Likely to Lead House Digital Assets Subcommittee