John Deaton, founder of CryptoLaw and a pro-XRP lawyer, recently expressed his belief that the United States Securities and Exchange Commission (SEC) would lose its case against Ripple. Deaton’s statement came as a response to a tweet by former SEC enforcement official John Reed Stark, who highlighted that the SEC had started a crackdown on US-based cryptocurrency exchanges.
Examples of SEC’s Weak Arguments
Deaton supported his assertion by mentioning four instances where different judges found the SEC’s arguments to be meritless. He claimed that in the Ripple lawsuit, the judge shamed the SEC for not having a faithful allegiance to the law.
The legal expert also mentioned SEC cases against LBRY, Grayscale, and Voyager, where judges dismissed the regulator’s arguments as lacking clarity or making no sense, and even reprimanded the SEC’s ethics and behavior.
SEC Chair’s Approach Sparks Concern
Gary Gensler, the head of the U.S. Securities and Exchange Commission, recently testified before the House Finance Committee, revealing his understanding of regulatory duty.
According to Deaton, Gensler’s views imply that the SEC might find grounds for a crackdown on cryptocurrencies in various circumstances. This could include situations involving Twitter appearances, software updates, or legal teams, which Gensler and the SEC might consider sufficient for suspecting a crypto asset as securities requiring registration.
Challenges with the Howey Test and Legal Clarity
Deaton further pointed out that Gensler seems content with using the Howey Test, an outdated method from the first half of the 20th century, to try and prove that all cryptos–apart from Bitcoin–must be illegal without SEC approval. The lawyer also criticized the SEC’s stance that crypto projects must seek contact with the authority but ultimately do not receive resilient legal information.