John Deaton, a well-known pro-crypto attorney and U.S. Senate candidate, has accused the Securities and Exchange Commission (SEC) of causing significant financial harm to small investors through its regulatory approach to cryptocurrencies.
In a recent post on X, Deaton said the SEC’s actions have led to losses exceeding $15 billion for retail investors.
Deaton, who has represented thousands of XRP holders in legal proceedings, claimed the SEC’s enforcement practices amounted to “gross overreach,” significantly impacting small investors.
“The SEC’s misconduct and gross overreach caused small investors over $15 billion. On behalf of those 75K small investors I represented, we do not accept the SEC’s apology,” Deaton wrote.
SEC Faces Scrutiny for its Aggressive Regulatory Stance
His criticism comes at a time when the SEC has faced increasing scrutiny for its aggressive regulatory posture toward the crypto industry.
Deaton, who won the Republican nomination for the U.S. Senate in Massachusetts, is set to challenge Democratic Senator Elizabeth Warren in the upcoming November election.
He highlighted that he intends to hold the SEC accountable, particularly since, in his view, Senator Warren has been reluctant to do so.
On January 1, 2021, I filed a Writ of Mandamus against the @SECGov stating that the SEC had violated 75 years of legal precedent by claiming the token itself was a security.
I pointed out that orangegroves, condos, chinchillas, digital assets, and even beavers
, had been… https://t.co/N4EVLkNiaR
— John E Deaton (@JohnEDeaton1) September 13, 2024
The critique of the SEC coincides with a surprising shift in the agency’s stance regarding cryptocurrencies.
In a court filing shared by Coinbase’s Chief Legal Officer, Paul Grewal, the SEC acknowledged that it no longer views cryptocurrencies themselves as securities.
“The SEC regrets any confusion it may have invited” by previously suggesting that tokens themselves were securities,” the SEC’s amended complaint against Binance included a notable statement.
This represents a departure from the SEC’s earlier position, particularly regarding XRP, which had been classified as a security in past legal disputes.
Deaton has long advocated for clarity in how the SEC regulates cryptocurrencies, arguing that the agency’s actions have often been inconsistent.
He pointed to the SEC’s refusal to provide clear guidance on XRP, which led to a prolonged legal battle.
“All I asked was for the SEC to honor the law and make clear that the token itself (XRP) was NOT the security. The lawyers at the SEC not only refused to do so, but they attacked me personally,” Deaton remarked.
SEC Settles with eToro
Meanwhile, the regulator recently settled a case with trading platform eToro, forcing its U.S. operations to cease trading in nearly all crypto assets and imposing a $1.5 million fine.
This is just one example of the SEC’s ramped-up enforcement efforts in 2024.
According to a Sept. 9 report from Social Capital Markets, the SEC’s total monetary enforcement actions against crypto firms in 2024 had surged to $4.7 billion, a 3,000% increase from the previous year.
The regulator’s largest action came in June, when it reached a $4.47 billion settlement with Terraform Labs and its former CEO, Do Kwon, marking the SEC’s most substantial crypto enforcement to date.
Just recently, a coalition of seven U.S. states came together to challenge the SEC’s regulation of cryptocurrency.
Led by Iowa Attorney General Brenna Bird, the states have filed an amicus brief arguing that the SEC’s attempt to regulate cryptocurrencies constitutes a “power grab” that would stifle innovation, harm the crypto industry, and exceed the agency’s authority.
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