Caroline Crenshaw Sounds the Alarm: How Wall Street Deregulation Could Spark the Next Crisis
As Wall Street enters a new era of aggressive deregulation under President Donald Trump, concerns are mounting among regulators, economists, and investor advocacy groups. For outgoing Securities and Exchange Commission (SEC) Commissioner Caroline Crenshaw, the speed and scope of financial rollbacks evoke a chilling historical parallel: the runup to the stock market crash of 1929. In a wide-ranging interview, Crenshaw delivered her starkest warning yet, arguing that today’s regulatory dismantling threatens both market integrity and the financial security of millions of Americans.
Crenshaw, the last remaining Democrat on the commission, has long been a vocal critic of efforts to weaken disclosure rules, reduce corporate accountability, and loosen oversight on emerging sectors like cryptocurrency. With her term ending — and with earlier attempts at renomination derailed by a coordinated crypto lobbying campaign — she now speaks freely about what she sees as a dangerous shift in U.S. financial governance. Her concerns extend far beyond political partisanship; they touch upon the fundamental question of what financial markets require to function fairly and safely.
A Regulatory Retreat That Mirrors Past Crises
Crenshaw believes the SEC is dismantling guardrails that have underpinned U.S. financial stability for nearly a century. While industry advocates argue that deregulation promotes innovation, she sees a widening gap in investor protection and corporate oversight. The policies being pursued today, she warns, are reminiscent of conditions that preceded major financial collapses.
According to Crenshaw, core systems designed to ensure transparency, accountability, and investor fairness are being weakened without adequate alternatives. She argues that the SEC’s recent moves — including reducing public disclosures, curbing enforcement, and reshaping shareholder rights — collectively undermine market resilience. Her worry is not abstract: history shows that when oversight fails, bubbles form, misconduct proliferates, and ordinary investors pay the price.
- A shift away from long-standing transparency requirements threatens market integrity.
- Weakening gatekeeper systems may expose retail investors to unchecked risks.
- Deregulation increases the likelihood of fraud and corporate misconduct.
- Past financial crises emerged from similar policy climates.
Gatekeepers and Market Stability: What Happens Without Them?
For decades, the U.S. financial system has relied on a network of “gatekeepers” — auditors, brokers, exchanges, advisers, and regulators — who ensure that companies provide reliable information and follow essential market rules. These intermediaries help mitigate conflicts of interest and prevent market manipulation. Crenshaw fears that the current deregulatory wave is eroding this structure faster than new safeguards can be introduced.
She points to efforts to reduce mandatory disclosures, scale back reporting requirements, and shift investors into private markets where oversight is weaker and fees are higher. In particular, the SEC’s push to move from quarterly to semiannual reporting could deprive investors of timely and essential data. More concerning is the agency’s move to allow corporations to force shareholder disputes into mandatory arbitration — effectively sidelining class-action lawsuits that historically helped curb corporate abuse.
- Gatekeepers protect markets by enforcing professional standards.
- Reduced disclosures make it harder for investors to assess risk.
- Mandatory arbitration could silence shareholder rights.
- A shift to private markets exposes investors to opaque practices.
Is the SEC Losing Its Ability to Respond to the Next Crisis?
Crenshaw also warns of internal challenges that could hinder the agency’s ability to respond effectively to future market turmoil. The SEC has recently rolled back amendments to Form PF — a confidential report used to monitor hedge fund risks and identify systemic vulnerabilities. These data reductions, she argues, strip the agency of critical tools needed to assess emerging threats.
The agency is also suffering from a wave of staff departures, resulting in a loss of institutional knowledge. Many of the individuals who previously handled crisis response, deep market analysis, and complex enforcement actions are no longer in the agency, leaving gaps that may take years to fill. This lack of capacity, Crenshaw says, could limit the SEC’s ability not only to prevent a crisis but to react effectively when one occurs.
- Reduction of key reporting tools weakens systemic risk monitoring.
- Staff attrition has eroded the agency’s crisis-response infrastructure.
- Less expertise means slower identification of market abnormalities.
- The SEC may be unprepared for rapid market downturns.
The Growing Influence of Money and Politics in Regulation
One of the most troubling trends for Crenshaw is the increasing influence of political and financial power on regulatory outcomes. She notes that industries — especially crypto firms — have dramatically stepped up lobbying efforts, spending tens of millions of dollars to influence federal policymaking. Her own renomination was blocked, she says, partly due to a coordinated pressure campaign led by crypto industry leaders.
She argues that the structural independence of agencies like the SEC was created precisely to shield regulators from such pressures. But recent moves by the Trump administration to remove Democratic commissioners across multiple independent agencies have weakened this system, creating a political environment where dissent is minimized and industry preference can dominate policy.
- Crypto lobbying has become a major force shaping policy debates.
- The weakening of bipartisan agency structures reduces oversight diversity.
- Political intervention risks skewing regulation in favor of industry.
- Regulatory capture becomes more likely as financial power expands.
Are Markets Becoming Casinos? The Blurring Line Between Investing and Gambling
Crenshaw is deeply concerned about what she describes as a cultural and structural “gamification” of investing. From social media hype to speculative trading apps, the boundary between long-term investing and short-term gambling has grown increasingly thin. She fears that deregulation will only accelerate this trend by allowing firms to market complex, risky products without adequate oversight.
She warns that as more Americans enter markets through self-directed retirement accounts, they face substantial risk without the protections that traditional intermediaries once provided. Social-media-driven speculation, combined with reduced disclosure requirements, could lead many investors to unknowingly take on catastrophic risks.
- Speculative trading behavior is rising among younger investors.
- Reduced oversight may enable misleading or aggressive marketing.
- Less transparency increases the danger of fraud and loss.
- Future retirees may face severe financial shortfalls.
Could Deregulation Trigger Another Crash?
When asked directly if she fears a market crash, Crenshaw is cautious but candid: she cannot predict timing, but she sees unmistakable warning signs. High asset valuations, the rapid acceleration of AI-related investments, and mounting leverage in private markets all pose risks. Combined with a weakened regulatory infrastructure, she believes these trends echo the conditions that preceded previous collapses.
While she emphasizes that markets are inherently cyclical, she also stresses that regulation plays a crucial role in limiting the severity of downturns. Without strong checks and reliable oversight, even small disruptions can spiral into major crises. Whether the current cycle ends smoothly or catastrophically, she argues, will depend heavily on how policymakers respond in the coming years.
- High valuations and speculation mirror pre-crisis periods.
- AI-driven investment surges may be forming a bubble.
- Weak oversight amplifies the impact of market corrections.
- Crisis response capacity appears diminished within the SEC.
What Should Investors Do Now?
Crenshaw’s message to everyday investors is simple but urgent: exercise caution. With fewer safeguards, more complex products, and increasingly aggressive marketing tactics, investors must rely on fundamental principles — thorough research, diversified assets, and professional guidance from advisers who still operate under fiduciary duty.
She warns against speculative behavior driven by social media or fear of missing out (FOMO). Although some investors may see quick gains, long-term studies consistently show that disciplined strategies outperform high-risk trading. The stakes are especially high as the country grapples with a looming retirement crisis; millions of Americans may not accumulate the savings needed to support themselves later in life if speculative culture continues unchecked.
- Focus on fundamentals, not hype.
- Consult fiduciary advisers when evaluating uncertain products.
- Diversify investments to reduce exposure to volatility.
- Avoid treating markets as casinos driven by emotion or trends.
FAQ: Understanding the Risks Behind Today’s Deregulatory Wave
Why is deregulation considered risky by some experts?
Deregulation removes oversight mechanisms that protect investors and ensure transparent markets. Without these safeguards, fraud, speculation, and market manipulation become more likely, increasing systemic risk.
What does Caroline Crenshaw believe is the biggest danger?
She worries that weakening disclosure requirements and gatekeeper roles leaves investors vulnerable and reduces the market’s ability to detect or respond to crises.
How does crypto play into the SEC’s current challenges?
Crypto firms have expanded lobbying efforts and pushed for new regulatory frameworks. Crenshaw warns that efforts to rewrite long-standing financial rules for the sake of innovation may undermine investor protections.
Is the SEC prepared to manage the next market crisis?
Crenshaw believes the agency is understaffed and losing critical institutional knowledge, which may hinder crisis detection and response.
How can investors protect themselves in this environment?
By focusing on diversified, long-term investment strategies; avoiding speculative trading; and seeking guidance from fiduciary investment professionals.
Is there a real risk of a market crash?
While Crenshaw does not predict immediate collapse, she sees worrying similarities to past pre-crisis periods and believes the likelihood of instability is rising.