SEC's crypto stance gets a boost from Kim Kardashian

Kim Kardashian is every marketer's dream influencer. And that includes for SEC chair Gary Gensler.

Why it matters: If the Securities and Exchange Commission wanted to get the word out on its crypto stance — that most cryptocurrencies are securities — hanging that message on Kardashian has been a successful move.

• Gensler has been making that stance clear whenever and wherever he can — in congressional testimony, interviews and enforcement actions — but the subject has not exactly captured America's attention.
• The SEC's action yesterday on Kardashian, meanwhile, has been everywhere, landing Gensler on CNBC's Squawk Box — and yielding over 3 million Google news search results over the past 24 hours.

Be smart: Kardashian is more than her roughly 331 million Instagram followers. Her family’s reality show, of which she is the star, has been built into a billion-dollar brand, with literal sister-brand offshoots, also worth scads.

• Put her name in a headline, and it trends.

What's happening: The SEC on Monday charged Kardashian for promoting the EthereumMax token (no relation to the Ethereum blockchain) on her Instagram account in 2021 without properly disclosing that she was being paid for it.

In one respect, the SEC's motivation in the case is straight forward — to protect investors.

• "The [SEC] was put in place to protect the public in those circumstances when you’re hoping for a better future," Gensler said in an interview with CNBC on Monday.
• It's worth noting that the token's value plunged by over 95% in the 16 months from the time of Kardashian's post to the SEC's announcement, so anyone who did invest then would have paid the price.

The intrigue: But the situation touches on a more nuanced, and long-running battle between the crypto industry and the SEC. Are crypto tokens indeed "securities" and under the SEC's purview? And if so, which ones are?

• "The SEC is just assuming the token here is a security as part of its case and that question will never be posed to a judge, because [Ms. Kardashian] settled," Nick Morgan, partner at Paul Hastings, who previously served as trial counsel in the SEC’s Enforcement Division, tells Axios.
• Technically, the rule the SEC is invoking in "17(b)" refers to securities like stocks, but according to the SEC, EthereumMax is a security. That's the problem.

Of note: The SEC has not brought charges against the issuer of EthereumMax for issuing unregistered securities.

What they're saying: "You’re investing in something anticipating profits, based upon the efforts of others. And that’s what we found in this case with a EthereumMax," Gensler told CNBC.

What others are saying: More than one regulating authority put rules around advertising for crypto in the U.K., Serhii Zhdanov, CEO of crypto exchange Exmo tells Axios.

• "Crypto is just a boss word. An influencer just needs to say 'crypto' to get people to buy it," he said. "It’s important. There should be regulation around advertisement of cryptocurrency."

Zoom out: Kardashian is the latest, and most well-known celebrity to get caught in the SEC's crosshairs for advertising crypto.

• Past targets include professional boxer Floyd Mayweather Jr., record producer DJ Khaled, rapper T.I. and actor Steven Seagal.
• The string of crypto-related charges brought against the famous (or once-famous) follows a November 2017 SEC warning against celebrity endorsements, dating back to Gensler's predecessor, Jay Clayton.

The bottom line: Any publicity is good publicity? The SEC's Kardashian moment gave the EthereumMax token a 50% price boost, and trading volumes have ticked up 2,575%, according to data compiled by CoinMarketCap.

• It currently trades at $0.000000005255.