Crypto is a 'significantly non-compliant' market and investors need better protections as FTX faces collapse, SEC chief Gary Gensler says

• There must be stronger protections in place for investors in the crypto market, SEC Chair Gary Gensler said Thursday on CNBC.
• He appeared as crypto exchange FTX was on the verge of collapse in facing a potential shortfall of up to $8 billion.

There need to be stronger guardrails in place for investors in the multibillion-dollar crypto market, Securities and Exchange Commission Chair Gary Gensler said Thursday as the FTX exchange teetered on insolvency.

"Investors need better protection in this space. But I would say this: This is a field that's significantly non-compliant, but it's got regulation and those regulations are often very clear," he said in an interview with CNBC.

He appeared as contagion fears have been running high in the cryptocurrency market as investors watched FTX — the third-largest crypto exchange — veer toward collapse.

Binance on Wednesday ditched a plan to take over FTX, saying its issues "are beyond our control or ability to help." FTX CEO Sam Bankman-Fried on Thursday told investors the exchange faces a shortfall of up to $8 billion, according to Bloomberg.

The SEC and the Commodity Futures Trading Commission are investigating FTX.com in how it handled client funds, Bloomberg reported Wednesday.

On Thursday, Gensler said he couldn't speak about any possible probes but said the crypto world is interconnected with a few concentrated players.

There are multiple paths of regulation, including enforcement action, investor education, and working with crypto exchanges and lending platforms to get them "properly registered," he said.

"But we still need investor protection," he added.

One concentrated player in the crypto industry had "toxic combinations of lack of disclosure, customer money, a lot of leverage — meaning borrowing — and then trying to invest with that," he told CNBC.

When the markets turned, "it appears that a lot of customers lost money, and that's where our mission is. It's about those customers," Gensler said.

The chair said he's had "many meetings" with people working in the crypto industry. Gensler was asked about a March 29 meeting on his public calendar that included Bankman-Fried and IEX Group CEO and co-founder Brad Katsuyama. In March, FTX's US arm said it would take a stake in IEX, a private stock exchange operator.

"It's very clear in these meetings — same message to the public, same message to them — that non-compliance is not going to work. The public is going to be hurt," Gensler said. "But also we're going to continue on these dual paths. And if we need, going to be the cop on the beat, going into court, putting the facts and the law in front of judges."