- John Deaton criticized SEC Chair Gary Gensler’s notions of securities.
- Previously, Gensler lectured on the importance of securities laws for customer protection.
- David Schwartz raised questions on how the law is beneficial for customer protection.
John E. Deaton, the XRP attorney known for his acute comments on the Securities and Exchange Commission’s (SEC) unfavorable regulatory norms, cast doubt on SEC Chair Gary Gensler’s abstract notions of “security.” Recalling Gensler’s 2022 lecture on securities, Deaton asserted that the SEC Chair has no idea of the definition of a security or an investment contract.
In June 2022, Gensler, addressing the Massachusetts Institute of Technology (MIT), delivered a narrative on the role of securities law in investor protection, claiming that the rules promote complete transparency in transactions to avoid fraud and deceptive sales.
The SEC chair stated that the controversial Hinman speech by the former SEC Director William Hinman, which was crucial in the SEC vs. Ripple lawsuit, was “not a personal opinion.” Moreover, Gensler stressed that cryptocurrencies, including Bitcoin, Ether, and Litecoin, were not “securities”.
Deaton further criticized Gensler’s lack of clarity in his perceptions of securities and his ignorance of the court’s statements. Furthermore, the lawyer put into question the SEC’s misinterpretation of the Howey test to present XRP as an unregistered security. He stated:
According to him, if an asset is being promoted by someone, it transforms the asset into a security. He completely ignores the fact that US securities laws do not apply to the purchase of an asset for non-investment use cases.
Meanwhile, Ripple’s Chief Technology Officer, David Schwartz, took to X (formerly Twitter) to playfully put forward “three pieces of legal advice” that could be inferred from Gensler’s notions. However, Schwartz posed an ultimate question concerning the SEC’s crypto regulations that remains unanswered, “How does that protect investors exactly?”.
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