Could The Stock Market Crash From Trump’s Deregulation? An Sec Official Is Worried.

Wall Street is undergoing a deregulatory renaissance courtesy of President Donald Trump. And for Caroline Crenshaw, a commissioner at the Securities and Exchange Commission, it all feels a little too similar to the runup to the Great Depression.

“The true advisability of all these policies will reveal themselves eventually,” Crenshaw told POLITICO Magazine in an interview. “But I certainly wouldn’t be alone in analogizing the trend toward deregulation in this current environment to the period immediately prior to the stock market crash in 1929.”

With her term complete, Crenshaw will soon depart as the lone Democrat in the SEC, and she leaves with a warning that the powerful financial regulator is putting investors in jeopardy as the Trump administration rushes to loosen rules on Wall Street.

An Army reservist and long-time SEC staffer, Crenshaw first became a commissioner at the agency in the final months of Trump’s first administration. She’s spoken in increasingly dire terms about many of the SEC’s recent and seemingly obscure moves under Chair Paul Atkins, Trump’s GOP pick.

She’s questioned the agency’s push to stand up new regulations around crypto assets,worried that it could upend decades-old investor protections. She’s said the SEC is “silencing shareholders” as it hands companies new power to force shareholder lawsuits into arbitration. And she’s warned that the SEC was playing a “perilous” game of Jenga by pulling back on certain rules.

Had Crenshaw stayed on at the SEC, Trump might have fired her, like many of her Democratic counterparts at what had historically been independent agencies. But Trump never got the chance: The crypto lobby successfully helpedderail a bid to renominate Crenshaw in late 2024.

In a wide-ranging conversation, Crenshaw discussed her parting warning for investors, her concerns about crypto and the blurring lines between investing and gambling.

This conversation was edited for length and clarity. 

You’ve issued serious warnings about many of the policy changes and plans of this SEC. What do you think the SEC is walking investors into?

We are moving away from financial intermediaries and gatekeepers and the professional standards that keep markets safe. 

I worry that we are intent on repeating mistakes of the past. Maybe the gatekeeper model is not perfect, but we’re approaching change in such a way that we’re not replacing it with potentially anything. We don’t have a plan in mind for who’s going to take over that role. How are investors going to get that information? Who’s going to provide the additional oversight?

We’re also moving away from transparent markets. We see this, for example, with the stated intent [by the SEC’s new leadership] to move to semiannual reporting, roll back certain disclosures like executive compensation and climate [risk], promote this flow of capital including self-directed retirement accounts into private markets where there’s less consistency, less disclosure, higher fees. We’re retreating from the Administrative Procedure Act and notice and comment rulemaking. All of the processes, all of the information that has been required to be transparent, we are moving away from, and I think that’s a huge problem.

We’ve been criticized in the past for being paternalistic, not allowing investors to have choice, not having investors be able to make their own decisions. Well, it strikes me that that’s exactly what we’re doing now. We’re making decisions and asserting our judgment for those of investors and for those in the markets without this transparent rulemaking, without these disclosures, and saying, “Nope, actually our view is best.” And I’m not sure that’s true.

We’re reducing corporate accountability. In my view, deterring misconduct is a public good. Corporate actors come into compliance with the rules because failing to do so has costs. But we’re moving away from the deterrence framework: dropping litigations, lower enforcement numbers, lower civil penalties, presidential pardons, allowing mandatory arbitration, meaning no-class action private enforcement of shareholder rights. Our whistleblower cadence has really ground down to almost a halt.

We’ve also inhibited our own ability to predict or to respond to market events. We’ve stated we’re going to roll back the amendments and make reductions to what was provided on Form PF [which includes details on certain investment fund advisers’ portfolios]. That’s information that provides systemic risk data to the commission. That’s hugely important as we’re assessing market risk, market crises and how to respond. It’s a huge loss of institutional knowledge as well, given all the staff departures we’ve had. So we’re at a disadvantage in not even just predicting market events, but in responding.

These trends embody a sort of chaos that has characterized this past year. The pace has been frenetic. The analysis of our policies has been non-existent, in most cases. And the repercussions, I would argue, are dire.

We live in an echo chamber where politicians and policymakers are really making their own truth through repetition. But I do think markets have a way of correcting themselves — not always immediately, but over time. The true advisability of all these policies will reveal themselves eventually. But I certainly wouldn’t be alone in analogizing the trend toward deregulation in this current environment to the period immediately prior to the stock market crash in 1929.

This is a very fragile time in the economy and markets. A lot of people believe we’re in a bubble around artificial intelligence. Yet policymakers appear to be plowing ahead with many of these deregulatory efforts. Why do you think that is?

It’s a whole combination of factors. There is a belief that the markets will regulate themselves, and all you need to do is give them this opportunity. You see that with investors and the idea that we’re being too paternalistic — that investors should have this choice and it will all work itself out. The problem is we’re not.

History has shown that complete market freedom just does not work. And we’re not actually letting markets decide on their own. We are saying now issuers can have mandatory arbitration clauses, but investors have always been able to choose. If they wanted to have an arbitration rather than go to court, they could. So instead, we’re allowing industry to pick for them, and we’re putting our thumb on the scale for industry over investors. I don’t think that’s letting free markets decide.

There’s all sorts of different interests in the market, and money has always played some sort of role. As independent agencies, our job is to combat that. But I think with changes in the independence of agencies and in structure, there’s certainly a concern that money is going to play more of an interest than it ever has before.

How worried are you about a crash? You talked about the resource issue at the SEC. Do you think the SEC is equipped to be able to prevent or handle one?

I don’t know about timing, and if I had a crystal ball, that would be fantastic. But I don’t, so I don’t know. But I certainly think there are pieces in place that are analogous and trends in place that are analogous to crashes in the past, and so it is something that I’m worried about.

Are we adequately able to respond? We are sorely understaffed. I think we will have a response. I don’t know what that response would look like, but I do think we are sorely understaffed. We had a huge exodus of expertise, of institutional knowledge of how to respond to various pieces of information that may be market indicators.

Later this month, you’ll leave the SEC after more than five years as a commissioner. That said, you didn’t want to — last year, you were nominated for another term at the agency but were ultimately thwarted by this mutiny from crypto folks who protested. Do you fear the power that crypto, which spent heavily in the last election and is promising to do the same in 2026, now has in Washington?

I fear the power that money has in politics. I don’t think it’s unique to any one industry.

There have been rules in place, such as the pay-to-play rule in the investment adviser space and the structure of independent agencies to help combat that. Is it perfect? No. Has it ever been perfect? No. Have there been years of trying to have efforts at reform that have not gone anywhere? Absolutely. So it’s never been perfect. There’s always been that influence. But I do think we’re at a moment in history where the influence of money across the board is more worrisome than in many, many, many, many years.

Have you felt that directly, as an SEC commissioner, where folks come in and try to exert their influence in ways that maybe before the 2024 election, they wouldn’t have even thought possible?

For whatever reason, I don’t think with me personally. I have not seen a direct scenario that you posit. I certainly see behaviors that I’ve never seen before with online threats to our staff when it’s never the staff making the decision. It’s the commission that makes the decisions. But threats to staff, personal attacks on non-decision makers, letters, threats to go above our heads — all sorts of things. That type of response is — in my experience in over a decade at the commission — unprecedented.

Is there any one thing that concerns you most about crypto? 

We’ve had market rules in place for 90 years that have helped allow for innovation, that have helped promote businesses, to ensure capital formation, to ensure the fairness and efficiency of the markets, and I think they’ve worked incredibly well.

In the name of innovation, there is an attack on our fundamental legal structures. All innovation is not necessarily good. Some innovation certainly is, but innovation for the sake of innovation itself — and whether or not it’s truly innovation — is certainly something that needs to be looked at closely. Undermining the rules, rolling back all of them because they can’t move forward with certain [ones], that worries me.

I have absolutely no problem with innovation and new technology, but I think if you’re looking at where your technology can’t meet the current standards, I’m inclined to ask, why not? How do you then provide investors in the markets with the appropriate information? How do you help ensure that we’re not going to undermine the markets entirely?

Trump has ousted virtually every other Democratic member of historically independent federal agencies — a fight the Supreme Court is hearing about as we speak. What are the consequences of doing that? 

The structure of a bipartisan independent agency is an important one. All you have to do is look back to two years ago and look at colleagues on this commission. A lot of the information that industry was able to use to challenge our [rules], to help to inspire their comments, to think through what we were doing was courtesy of statements, viewpoints and speeches from my colleagues. And that’s the way it should be.

Fundamentally, the markets do better with predictability and consistency. Without opposition views that help keep a commission or an independent agency thinking about all aspects of [a rule], moderating its actions, understanding all the different voices — you’re going to be looking at much larger swings in policy. The markets are going to be looking at much less consistency. They’re going to worry that something that’s put in place now will be undone. Depending on how this administration goes about the work, the ability to undo those may become easier if this administration has its way, which means future administrations can undo things more easily as well.

What’s your message to the everyday investor as they see this new world of investment opportunities open up, assuming the administration is successful in loosening rules?

They need to be careful. The options to invest in all sorts of products are going to be like never before. The marketing and sales pitches around these products, I think, are going to be everywhere in all fora, and I suspect with fewer protections on how they’re being advertised.

Folks need to understand the markets are not casinos. I think folks really do need to take that seriously. Unfortunately, with casinos as we all know, in the long term, the house always wins. And I think the markets should not be designed that way. Folks really just need to abide by fundamentals right now — understand the products with investment advisers or brokers who have their fiduciary and best interests still required at this point. And I think they need to be very, very careful.

Do you see investing and gambling becoming one and the same right now? 

I do worry that there is an attitude that this is more about tweets and FOMO. I worry people are going to get hurt in the short term, and that in the long term the country is going to have to figure out a solution.

If we’re already facing a retirement crisis — as folks save less and less potentially over time and have this attitude — I worry that that’s a recipe for really big problems down the road when folks are unable to retire. It can lead to even bigger problems than an individual who at the end of the day treats this as a little bit more of a casino. And yeah, in the short term, they may make some [money]. But studies have shown in the long term, you do not do as well as you do as buy and hold.