John Deaton, a prominent pro-crypto attorney and current U.S. Senate candidate, has accused the Securities and Exchange Commission (SEC) of inflicting substantial financial harm on retail investors due to its stringent regulatory stance on cryptocurrencies. Deaton claimed in a post on X (formerly Twitter) that the SEC’s actions have led to more than $15 billion in losses for small investors.
Deaton Criticizes SEC’s Overreach Deaton, who has represented over 75,000 XRP holders in legal battles, stated that the SEC’s enforcement actions amounted to “gross overreach,” particularly in its handling of crypto-related cases. He argued that this approach disproportionately affected small investors and accused the SEC of misconduct, rejecting any apology from the agency on behalf of the investors he represented.
His remarks come at a time when the SEC is under increasing scrutiny for its aggressive approach to cryptocurrency regulation. Deaton, the Republican nominee for the U.S. Senate in Massachusetts, plans to challenge Senator Elizabeth Warren in the upcoming November election. He has emphasized holding the SEC accountable, contrasting his stance with Warren, who he claims has not adequately addressed the agency’s actions.
SEC’s Shift in Position on Cryptocurrencies Deaton’s criticism aligns with a recent shift in the SEC’s stance on cryptocurrencies. In a court filing, the SEC admitted that it no longer views cryptocurrencies as securities, a significant reversal from its previous position. This change was revealed in the SEC’s amended complaint against Binance, where the agency expressed regret for the confusion caused by suggesting that tokens themselves were securities.
This represents a major shift from the SEC’s past classification of cryptocurrencies like XRP, which was the subject of a protracted legal dispute. Deaton has consistently called for clarity in the regulation of cryptocurrencies, advocating for clearer guidelines to prevent confusion and inconsistency.
SEC’s Enforcement Efforts and Settlements In a related development, the SEC recently settled a case with eToro, resulting in the cessation of most crypto trading on the platform’s U.S. operations and the imposition of a $1.5 million fine. This settlement is part of the SEC’s intensified enforcement efforts in 2024. The agency’s enforcement actions against crypto firms have surged to $4.7 billion this year, a dramatic increase from the previous year.
One of the SEC’s largest actions involved a $4.47 billion settlement with Terraform Labs and its former CEO, Do Kwon. Additionally, seven U.S. states, led by Iowa Attorney General Brenna Bird, have filed an amicus brief challenging the SEC’s authority to regulate cryptocurrencies, accusing the agency of overstepping its boundaries and stifling innovation in the crypto industry.
