Wall Street’s top cop is headed for a clash with the trendy online brokerage firm Robinhood. The regulator could be picking a fight with its next boss, too. Robinhood Chief Legal Officer Dan Gallagher is emerging as a leading contender to head the Securities and Exchange Commission should Donald Trump win back the presidency, according to a dozen former top regulators, lobbyists and securities lawyers. “He'd be a natural choice," one former senior SEC official told MM. But Gallagher — a onetime SEC commissioner who is known for his affability and political chops — may find himself sparring with the agency first. The SEC is weighing a lawsuit over Robinhood's swelling cryptocurrency business in a case that would mark the latest salvo in Chair Gary Gensler's crackdown on the $2 trillion market. The SEC is looking into whether Robinhood is operating an unregistered broker-dealer and clearing agency in the crypto markets. Charges are not guaranteed, but if the agency does sue, the resulting legal battle could thrust a new and awkward spotlight onto Gallagher — just as the race for the chairmanship heats up. For his part, Gallagher has a message for the SEC: Don't do it. “It’s a dog of a case,” he told MM. Robinhood, Gallagher said, offers trading in a fraction of crypto tokens compared to others that have hundreds on their platforms. And the company doesn’t have any crypto lending or staking products, he said. “We’ve been forgoing revenue for the company by not going hog wild listing coins, and I think that puts us in a very, very unique position,” Gallagher said. “Shooting at the good guys is a really bad policy.” An SEC spokesperson declined to comment. Eight years ago, a rotating cast of characters from the financial, corporate and legal worlds swung through Trump Tower as they sought to join the then-incoming president's administration. Now, as evidenced by Gallagher's brewing candidacy, the revolving door between government and industry appears primed to start spinning once again if Trump wins. “This is the name of the game: Get the fox in the henhouse,” said Richard Painter, who served as chief ethics lawyer for President George W. Bush. Other names floating around K Street as potential SEC chairs under Trump include former Commodity Futures Trading Commission Chair Chris Giancarlo, who is known online as "CryptoDad"; former SEC General Counsel Robert Stebbins, now a partner at the law firm Willkie Farr & Gallagher; and current SEC Commissioner Hester Peirce, who occupies a Republican seat on the agency's five-person commission. Yet Gallagher’s ascendancy to the chair has long been a matter of when, not if, for some Republicans. “Dan would be great,” Rep. Bill Huizenga (R-Mich.) told our Jasper Goodman following a House Financial Services Hearing where Gallagher testified last month. “I've had a great relationship working with him, even when we disagreed on some stuff.” “Ultimately, you want someone who's thoughtful, experienced, and not just ideologically politically driven,” the Michigan Republican said. “That's been, I think, the problem with Gensler." Gallagher as a commissioner blasted the package of rules enacted in the wake of the 2008 financial crisis. He called for a sweeping review of trading in the U.S. stock market and was early to raise concern about the SEC’s internal courts, which have since been declared unconstitutional in certain cases by the Supreme Court. He was also a regular on Capitol Hill, briefing lawmakers on the wonky area of securities law. If Trump did pick Gallagher, the Robinhood executive could face a contentious confirmation process. Democrats have long been wary of industry officials taking over federal regulators, and Robinhood has attracted a fair amount of congressional scrutiny over the years. (Remember GameStop — the bizarre market phenomenon of 2021 when Robinhood had to cut investors off from buying more shares in the beleaguered video game retailer’s stock, drawing the ire of lawmakers across Capitol Hill?) But Gallagher argues that was then. The company has since overhauled its compliance and risk-management programs, he said. And as for any revolving-door concerns, he says having experience both in and out of government is a good thing. Whether Gallagher would want to leave Robinhood is unclear. He told MM that he loves his job and that it’s “an honor to have my name included in any discussion of who may be the next SEC chairman.” Make no mistake, though, Gallagher has clear issues with the SEC’s direction. Just ask him about crypto. He told MM that if he had been chair in the last few years, there would be tailored rules on the books already, as the industry has long been seeking, offering “a path forward for at least a baseline registration system” for crypto exchanges and brokers. And even then, Gallagher believes there would still need to be legislation. “I would have done things differently,” he said. “I’ve known Gary for a long time and have a lot of respect for Gary, but, on this one, I disagree with him.” IT’S MONDAY — And Election Day is 29 days away. Who’s your pick for Trump 2.0 SEC chair? Give me a shout: dharty@politico.com. And as always, if you’ve got tips for Sam, send them to ssutton@politico.com.
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