 We are joined today by Renegade SEC Commissioner, Hester Purse, late of the Mercatus Center. She has written a very interesting, dare I say blistering critique of a recent decision by the SEC, the Securities and Exchange Commission. Could you talk just a little bit about the structure of the SEC for people who don't understand it? You know, this commissioner system, I've read your work on this. I know you were actually an advocate of that system and now as someone who's inside of it, what is that like being on a board of commissioners who disagree on topics and how does that form, or how does that affect the ultimate decision-making process? Yeah, I mean, there are five of us and the chairman sets the agenda and manages the staff. But, and so we have less input on sort of the rules that we're gonna be doing and so forth. But we all have a voice and the idea is that you wanna have people from different perspectives because you wanna have some policy consistency over time. We all vote on every enforcement action and on every rule-making. People sometimes say to me, well, Hester, you do nothing except for talk about things. So why don't you just resign? And I think the point is, and other people say to me, well, someone who is as skeptical of regulation as you are shouldn't even be at a regulator. In my response is I think it's really important to have people with different voices saying, we need to look at these things from a different perspective. And sometimes it takes a long time to shift the thinking but I think it's worth having people sort of debating these things rather than just coming out with one view. I mean, the world is very complicated and there's more than one way to look at things. We've got two questions for you and we're gonna let you go at 1.30. First, can you, building on that, what is your general theory of good regulation in the financial sector? As when you were working at the Mercatus Center at George Mason, you wrote, you were a fierce critic of Sarbanes-Oxley and Dodd-Frank, the last two mega pieces of legislation on the financial sector. What does good regulation look like? If you were able to write that. Well, I think the first, my first principle is that if two people voluntarily agree that they wanna do something, there needs to be a very good reason for the government to step in into that transaction and say, no, you can't do that or you have to do it differently. There are times when the two people's agreement to do something can have consequences for other people outside of that transaction, we have to be thinking about that. So that's my general philosophy. I think we need to make sure that people's incentives are match up with consequences, right? So if you take a step that's a stupid step and you lose a lot of money, the government shouldn't be coming in to prevent you from losing it. And unfortunately, that has happened a lot in our financial system and it sort of changed the way everything works and it's led government to come in and say, well, since we're burying the consequences when people make stupid decisions, we're gonna try to make decisions for them. But because government doesn't have the right incentives, it's very difficult for government to make decisions effectively. Markets are much more effective at conveying information than a regulatory system is. And so we need to capitalize on that. We need to take advantage of the fact that markets transmit information really well. So that might, my theory is always, yeah, there's a place for regulation, but it shouldn't be the first place we look, it should be the last place. What does a good regulation, or what's an example, do you think, of a good regulation that actually reduces transaction costs without distorting behaviors? I think we can play a role in helping people get disclosure to make their own decisions about things. So, and certainly, there are rules around mutual funds that I think have been effective rules. There are a lot of things the SEC does that I think do help reduce transaction costs. But I think too often we try to just jump in and make a merit-based decision based on our understanding of someone else's circumstances. And I find that really offensive. There's kind of the inevitability that regulators are gonna try to regulate. You mentioned some of the issues that arise there kind of they get comfortable with incumbent firms and then makes it harder for new entrants. So this was all meant to disrupt that whole system. Is there a case for just saying, okay, if the SEC wants to put out some sort of registration form and make it optional and let people who wanna opt in to only the SEC approved versions, that's fine. But just let crypto be crypto and people can kind of enter at their own risk. Yeah, and I certainly understand that point of view but I think we have rules on the books and to the extent that whether it's crypto or something else, those implicate the existing rules then we have to enforce those rules. Now, if you're talking about do we wanna develop a new regulatory framework where there really are gaps and where things really aren't covered, that's a conversation that we should be having. And I think one of the things I always say is don't jump to the conclusion that regulation is going to be the answer to solving problems. I mean, a lot of the problems we saw with centralized entities in the crypto world during the last year are problems that are very similar to problems we've seen with traditional financial intermediaries. But there also are things that people can do on their own to hold those intermediaries accountable. And as people working at intermediaries, they can do things to show people that they're doing what they're saying they're doing. So people in crypto shouldn't be jumping to the conclusion that regulation is always the first and best answer. We have to have this conversation as a community. I'm maybe on one side of the spectrum and saying, look, let's figure out whether there's a better way to do this but there are other people who are very much committed to having a regulatory solution. And that's just something in this society we got to work out and figure out where most people are. It's really important for people who are in crypto to think about applying the lessons from traditional finance and thinking about that. Thinking about if you're really trying to build something decentralized, what does that actually look like? And then sort of thinking about whether it makes sense to say, let's try to carve out the decentralized world and figure out whether and really make the pitch that regulation is not, wouldn't play the same role there because the decentralization, the on-chain aspects, the fact that everyone can participate on the same terms, that actually takes the place of regulation. It's harder to make that case when you're talking about large centralized intermediaries that are holding people's assets. It is important to think about where are the spaces where people just want to be able to say, yes, I'm opting in to a less regulated space. I'm certainly open to something like that. I don't know whether others in Washington are, but I think everyone goes in eyes wide open. You've made a choice to operate in a space that has less regulation than other spaces. Hey, thanks for watching that excerpt from our live conversation with SEC Commissioner Hester Purse and crypto investor and writer Nick Carter about the government's escalating crackdown on cryptocurrency exchanges like Kraken and the broader DeFi economy. Join me and Nicholas be here every Thursday at 1 p.m. Eastern for more conversations like this and subscribe to Reasons YouTube channel for notifications whenever our videos go live. Thanks for watching.