Deaton’s Takes a Strong Stand Against SEC’s Crypto Securities Label – Investor Bites

SNEAK PEEK

• Deaton opposes the SEC’s classification of cryptocurrencies as securities.
• Coinbase’s defence against SEC’s stance is crucial yet precarious.
• The class-action lawsuit could challenge SEC if prominent crypto figures abstain.

Prominent crypto-lawyer John E. Deaton has taken a strong stance against the U.S. Securities and Exchange Commission’s (SEC) categorization of various cryptocurrencies as securities. He asserts that ADA, MATIC, XRP, and ALGO tokens are digital code sequences. 

All I know is that ADA, MATIC, XRP, ALGO, etc are NOT securities. They are digital code sequences, existing in software, traveling through cyberspace. We don’t have to read the Telegram decision that made it clear that the GRAM token was NOT the security, we need only rely on the…

— John E Deaton (@JohnEDeaton1) June 29, 2023

Further, according to Deaton, these tokens should not be deemed securities, regardless of who sells them or the context of the sale. Emphasizing his point, Deaton cited the precedent-setting Howey case, saying it clearly distinguished between assets and securities. 

In this influential decision, the Supreme Court clarified that an underlying asset’s speculative nature or intrinsic value was immaterial to its classification. Therefore, Deaton argues that a token could no longer be considered security than orange groves, beavers, whisky, chinchillas, or real estate.

On the other hand, Coinbase, one of the leading cryptocurrency exchanges, has been dragged into a lawsuit with the SEC regarding the non-security status of many tokens. Similarly, Jeremy Hogan, another prominent voice in the crypto-legal community, acknowledged the difficult position of Coinbase in his response to Deaton’s stance. 

The main problem Coinbase faces in its SEC lawsuit is that it has to essentially defend the non-security status of numerous tokens.

Here you see that when confronted with a statement by Polygon, Coinbase can only respond “It says what it says.”

Fighting from a weak position. https://t.co/TYOm3SH6eb pic.twitter.com/WeEjxR75sg

— Jeremy Hogan (@attorneyjeremy1) June 29, 2023

Consequently, Hogan highlighted Coinbase’s limited capability to argue against the SEC’s position, putting the exchange at a potential disadvantage. As per reports, the court case with the SEC may represent a significant threat to the burgeoning cryptocurrency industry. Moreover, Hogan’s response underscores Coinbase’s precarious situation and the importance of a robust defence strategy.

Amidst these developments, a potential class-action lawsuit led by Deaton is poised to challenge the SEC’s position. This move gains particular importance if prominent crypto figures such as Sandeep Nailwal of Polygon, Charles Hoskinson of Cardano, and Silvio Micali of Algorand Foundation refrain from mounting their defences.

However, the path forward seems fraught with difficulties. The ability to establish the nature of these digital assets will significantly shape the future of the crypto market. And so, the world waits in anticipation, watching as the battle unfolds in this crucial arena of securities law and digital assets.

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• Source: https://investorbites.com/deatons-takes-a-strong-stand-against-secs-crypto-securities-label/