FOX Business Senior Correspondent Charlie Gasparino and Massachusetts Senate candidate John Deaton join “The Claman Countdown” to discuss Coinbase’s filing of amicus briefs in its legal battle with the SEC.
Massachusetts Senate candidate John Deaton isn’t letting his busy campaign stop him from fighting the Securities and Exchange Commission on behalf of the crypto industry.
FOX business is be the first to report A lawyer for a crypto enthusiast and now political candidate files a court brief in the Southern District of New York on Friday in support of Coinbase, the largest U.S. cryptocurrency exchange, in its ongoing legal battle with the SEC. submitted.
Deaton said he is intervening in the lawsuit on behalf of 4,701 Coinbase users, developers, and crypto investors who want their voices heard in court.
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WOBURN, Mass. – April 12: Republican U.S. Senate candidate John Deaton poses for a portrait. (Photo by Suzanne Kreiter/Boston Globe via Getty Images) (Getty Images/Getty Images)
“SEC Chairman Gary Gensler and his agents have shown that they have no interest in protecting small investors and are acting solely to serve their political masters,” Deaton said on FOX. told Business. “The SEC has unlimited resources paid for by taxpayers, and Coinbase is a multi-billion dollar company with the best lawyers money can buy. Consumers deserve an advocate and a voice as well. there is.”
Paul Grewal, Coinbase’s chief legal officer, thanked Deaton and the industry group Blockchain Association for filing the court brief. post on his X account Friday afternoon. The SEC did not respond to requests for comment.
In June, the SEC charged Coinbase with violating securities laws by operating as an unregistered broker-dealer that offered unregistered securities in the form of crypto tokens on its platform. A Manhattan judge ruled in March that the SEC had sufficient grounds to proceed with the lawsuit.
Coinbase then filed a so-called interlocutory petition, asking the judge to halt the proceedings so the higher court can resolve once and for all the biggest legal impasse dividing the SEC and the crypto industry. Cryptocurrency trading?
The U.S. Securities and Exchange Commission seal is affixed to the wall of SEC headquarters. (Reuters/Jonathan Ernst/Reuters Photo)
The Howie Test is the result of a 1946 Supreme Court decision and is a litmus test used by the country’s highest court to determine whether a transaction qualifies as an investment contract and thus a security.
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The SEC argues that all cryptocurrencies, except for Bitcoin, are likely securities because they are similar to traditional investments such as stocks and bonds, where investors buy products in hopes of making a profit. ing.
The cryptocurrency industry is concerned that the SEC is engaging in a jurisdictional usurpation to force digital assets into the country’s existing framework of securities laws, which were enacted in the 1930s and did not take blockchain technology into account. It is claimed that Many in the industry believe that most digital assets more closely resemble commodities and therefore fall under the jurisdiction of the SEC’s sister agency, the Commodity Futures Trading Commission.
In his court filing, Deaton points to the SEC’s inconsistent views on how tokens should be regulated.
SEC lawyers in the Coinbase case argued that Bitcoin, the only asset the SEC considers not to be a security, achieved its status because there is no ecosystem, or “network,” behind it. .
Deaton argues that Bitcoin has arguably the largest and most established ecosystem, which is why investors choose to put their money into it.
Cryptocurrency mixing platform Tornado Cash is under US sanctions for alleged money laundering. Cryptocurrency illustration photo taken on January 24, 2022. (Reuters/Dado Ruvic/Illustration/Reuters)
“Bitcoin is certainly distinguishable from other cryptocurrencies, but it would be completely foolish to argue that it is not a security because, unlike other tokens, it does not have an ecosystem,” Deaton said.
Deaton’s brief harshly criticizes the SEC’s “bad faith” approach to regulating cryptocurrencies, supports Coinbase’s appellate motion, and argues that the SEC applies the Howie test to digital assets. It contends that, given the inconsistent methods used, this is ultimately a matter for a higher authority to decide. court.
“If the Howie test were to be interpreted and used to permanently include all transactions, an appellate court, perhaps the U.S. Supreme Court, would be needed.”
Be the person who validates it,” he wrote.
Deaton also cited statements from Republican SEC Commissioners Hester Peirce and Mark Ueda, as well as government officials such as Rep. Ritchie Torres (D-N.Y.), saying that under the Gensler administration, expressed concern about the harsh regulatory environment.
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“The fundamental lack of clarity appears to be a strategic effort by the SEC to thwart the digital asset industry. If not rooted in malice, then at least in furtherance of its mission to protect investors. You can’t see it,” Deaton said. overview.
This will not be the first time Deaton, who is running as a Republican to unseat incumbent Democratic Sen. Elizabeth Warren of Massachusetts, will face off against securities regulators on behalf of the $2 trillion cryptocurrency industry. do not have.
Pictured is Democratic Massachusetts Sen. Elizabeth Warren (left) and Republican challenger John Deaton. (Getty Images/)
However, he is now active as a political candidate and has been able to use his bully pulpit to rally the crypto industry and its heavyweights to his campaign and raise large sums of money. It also helps that Warren is an ally of SEC Chairman Gary Gensler, one of the most anti-cryptocurrency members in Congress and an industry commentator.
Deaton has achieved folk hero status among retail holders of the XRP token for his involvement in cryptocurrency company Ripple’s three-year legal battle with the SEC. He represents XRP investors as a so-called amicus curiae, or “friend of the court,” and did the same on behalf of users of the LBC token in the SEC’s lawsuit against decentralized content sharing platform LBRY.
Deaton’s efforts in the Ripple case are seen as a watershed moment for the industry, as Manhattan District Judge Torres rules that the sale of the token XRP between retail investors on an exchange does not meet the SEC’s classification. It was widely seen as part of the reason for the decision. About securities trading.
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If the ruling is appealed, it would set a legal precedent that the SEC does not supervise transactions between retail investors who engage in secondary market transactions using exchanges such as Coinbase to buy and sell cryptocurrencies. It turns out.
The ruling has also sparked a heated legal debate over what makes a digital asset a security, a central argument in most of the SEC’s lawsuits against the crypto industry.
WASHINGTON, DC – SEPTEMBER 14: U.S. Securities and Exchange Commission Chairman Gary Gensler testifies at the Senate Banking, Housing and Urban Affairs Committee Oversight Hearing on the SEC in Washington, DC on September 14, 2021. . (Photo provided by (Evelyn Hochstein Poole/Getty Images/Getty Images)
The same three judges in the Southern District of New York have written a dissenting legal opinion on whether transactions involving digital assets meet the Howie test. Deaton cited this point in his brief as an argument for why Coinbase should be given permission to mount a legal challenge. This could completely solve the regulatory puzzle of digital assets.
It is difficult for interlocutory appeals to be granted, and it is unclear whether Judge Failla, who is presiding over the Coinbase case, will side with the exchanges on this issue.
