XRP holders' attorney John Deaton, the founder of CryptoLaw, has taken to Twitter to present compelling facts in support of Coinbase's claims against the SEC.
He started by asking his Twitter followers if Coinbase Chief Legal Officer Paul Grewal was making exaggerated statements or claims not meant to be taken literally by stating the SEC is violating the law.
Deaton went on to review a few facts. First, he stated that up until 2018, the SEC had no policy whatsoever regarding SEC staff owning crypto because digital assets were a new asset class and the SEC was unsure about them.
Is @iampaulgrewal engaging in hyperbole by claiming the SEC is violating the law?— John E Deaton (@JohnEDeaton1) July 4, 2023
LET’S REVIEW A FEW FACTS:
1) up until 2018, the SEC had no policy whatsoever regarding SEC staff owning Crypto because these digital assets were a new asset class and the SEC was unsure about it; https://t.co/9UU4jzuoZl
He added that in 2018, when former SEC official William Hinman was drafting his infamous speech discussing digital assets in general, and asserting that BTC and ETH were nonsecurities, senior officials at the SEC acknowledged that crypto assets fell into a "regulatory gap," and it was unclear that the SEC could even regulate.
Fast forward to 2019, when the Annual FSOC Report, signed by Jerome Powell, the then CFTC chair and Treasury secretary, highlighted in a report the growing market cap of "virtual currencies." The report highlighted BTC, ETH, LTC and XRP. Former SEC chair Jay Clayton also signed it without referencing U.S. securities laws.
Deaton presented another key fact: in early 2021, SEC Chair Gary Gensler, while testifying at his confirmation hearing, agreed that a "regulatory gap" exists and that there is no existing regulatory framework for crypto companies as they fall outside of the CFTC and SEC frameworks.
The CryptoLaw founder added that there is proposed legislation in the works dealing with crypto assets and how Congress wants them regulated. He notes that the bills take the regulatory authority out of the SEC's jurisdiction or limit the SEC's role in regulating crypto.
Building on all these facts, Deaton mentioned that there is not a single case in U.S. history finding that an investment contract existed between a promoter or issuer and a buyer when there was no privity, communication or relationship between said promoter and buyer.
Also, there is not a single case that has ever found the secondary sale of an asset once utilized in an investment contract transaction to also constitute an investment contract. Deaton adds that the only appellate case involving a secondary sale of an investment contract found otherwise.
He concluded by saying Coinbase's legal officer, Paul Grewal, was not hyperbolic by claiming that SEC Chair Gary Gensler and the SEC are violating the law as the agency is engaged in an unconstitutional expansion of the Howey test with its claims.