SEC’s Crypto Regulation Leaves John Deaton Feeling ‘Exorcist-Level’ Dizzy

Key Takeaways

• John Deaton blasted the SEC’s regulatory approach to crypto. 
• The Pro-XRP lawyer was surprised by the SEC’s decision to appeal the Ripple case.
• The SEC’s enforcement actions against crypto firms lack clarity and consistency.

As the Securities and Exchange Commission (SEC) gears up for another legal showdown against Ripple in the Secondary Circuit court, pro-crypto lawyer and Massachusetts Senate candidate John Deaton criticized the agency’s regulatory approach, labeling it “ass-backward.”

Deaton, who is running against anti-crypto Senator Elizabeth Warren, filed for an appearance as amicus counsel in the Ripple case, where he played a key role in the company’s defense against the SEC’s security allegations. His criticism of the SEC’s crypto regulation is rooted in its inconsistent and hypocritical approach towards crypto firms.

SEC’s “Head Spinning” Crypto Regulation

Taking to social media, Deaton expressed his frustration with the SEC’s crypto regulatory approach, likening it to the “possessed girl in the movie, The Exorcist,” a reference to the agency’s dizzying and contradictory stance on crypto assets.

Deaton’s main bone of contention is the SEC’s decision to appeal the Ripple case despite Judge Torres’ ruling that XRP is not a security.

This move, Deaton argues, highlights the agency’s “bizarre, hypocritical approach” towards crypto companies.

The GOP Primary winner underscored that the SEC is suing multiple crypto exchanges, such as Coinbase, Binance, and KuCoin, for unregistered securities sales, yet seems to have no issue with presidential candidates like Kamala Harris using these exchanges to cash out crypto donations.

Deaton also pointed out the SEC’s inconsistency, citing the agency’s decision to accelerate Coinbase’s IPO two years ago despite now alleging that the exchange is running an illegal business.

“Two years prior to alleging Coinbase is running an illegal business, the same SEC, after learning the specifics surrounding Coinbase’s business model, made a specific determination that accelerating Coinbase’s IPO was, in fact, in the public’s best interest,” Deaton wrote.  

Crypto Enforcement Failure

The SEC, led by Gary Gensler, has been criticized for its enforcement-based approach to crypto regulation, failing to clarify regulations applicable to crypto companies.

Instead of building comprehensive crypto regulations like its European and Asian counterparts, the SEC has taken an enforcement-based approach to regulation. 

The agency’s actions have been deemed a disaster for the crypto industry, with many lawsuits lost this year.

The SEC’s reliance on the Howey test, an outdated method of determining whether a transaction constitutes a security, has been widely criticized.

In an amended Binance complaint, the SEC admitted that using the term “crypto asset security” didn’t mean all crypto tokens are securities and promised to avoid using it in the future.

As the crypto industry navigates the regulatory landscape, the upcoming Presidential election is seen as a crucial factor in shaping the future of crypto regulations in the U.S.