A recent series of tweets by Stuart Alderoty, general counsel of Ripple Labs (XRP), has caused quite a stir among investors and regulators alike.
Alderoty’s claims that the U.S. Securities and Exchange Commission (SEC) is deliberately relegating its sister regulator, the Commodity Futures Trading Commission (CFTC), to the “kids’ table”- has caught the attention of many in the crypto industry.
Alderoty goes on to say that the SEC’s strategy is to attack various projects with its “regulation by enforcement” approach in order to expand its “jurisdiction beyond securities by telling judges w/a straight face we’re the government so we must be right.”
The SEC keeps relegating the CFTC to the kids’ table. That's their regulation by enforcement strategy – attack projects w/ varying resources so they can expand their jurisdiction beyond “securities” by telling judges w/a straight face we’re the government so we must be right. 2/3
— Stuart Alderoty (@s_alderoty) August 3, 2022
Meanwhile, in a recent tweet, attorney John Deaton, who was part of a recent hearing in the SEC v. LBRY case, stated that the SEC’s argument in the SEC v. LBRY case was ‘scary.’
“The SEC lawyer basically said something very dangerous,” Deaton informed his followers in a follow-up video.
— CryptoLaw (@CryptoLawUS) August 3, 2022
Deaton claims that the SEC attorney acknowledged that some people had bought LBC tokens for usage. Nonetheless, the utility argument was rejected. The same attorney also said it didn’t matter whether a large proportion of the tokens were acquired for speculative purposes rather than investment. As a result, any token may be deemed a security even if there is a small chance of profit.
“I just want you to think about this for a minute because that is so dangerous….it’s just an umbrella that usurps all kinds of asset classes,” Deaton added, noting that the definition might even apply to to the world’s largest cryptocurrency, Bitcoin (BTC), despite the fact that SEC Chair Gary Gensler himself has stated that BTC is a commodity.
While the SEC may feel that its new “regulation by enforcement” strategy will help it better protect investors and regulate the cryptocurrency market, Ripple’s General Counsel and other attorneys have spoken out against this move, calling it a “power grab.” The argument is that the SEC is trying to expand its jurisdiction beyond the realm of securities, which could have negative consequences for both investors and businesses operating in the cryptocurrency space.
With more and more companies entering into the crypto market, it will be interesting to see how this power struggle between the SEC and Ripple plays out.
As of press time, XRP is changing hands at $0.3799, up 0.03%. The $18 billion market cap altcoin traded in a range of $0.3722 – $0.3841, indicating volatility over the last 24 hours.
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