John Deaton, a well-known pro-crypto attorney and U.S. Senate candidate, has accused the Securities and Exchange Commission (SEC) of causing significant financial harm to small investors through its regulatory approach to cryptocurrencies, claiming that the SEC’s actions have led to losses exceeding $15 billion for retail investors. Deaton, who has represented thousands of XRP holders in legal proceedings, criticized the SEC’s enforcement practices as a gross overreach, significantly impacting small investors. He emphasized that the SEC’s misconduct has adversely affected small investors and that he does not accept the SEC’s apology on behalf of the 75,000 small investors he represented.
Deaton’s criticism of the SEC comes at a time when the agency has faced increasing scrutiny for its aggressive regulatory posture toward the crypto industry. He highlighted his plans to hold the SEC accountable, particularly in light of what he perceives as Senator Elizabeth Warren’s reluctance to do so. Deaton, who won the Republican nomination for the U.S. Senate in Massachusetts, is set to challenge Democratic Senator Elizabeth Warren in the upcoming November election. The critique of the SEC coincides with a surprising shift in the agency’s stance regarding cryptocurrencies, as the SEC recently acknowledged in a court filing that it no longer views cryptocurrencies themselves as securities, marking a significant departure from its previous position.
Deaton has long advocated for clarity in how the SEC regulates cryptocurrencies, arguing that the agency’s actions have often been inconsistent. He pointed to the SEC’s refusal to provide clear guidance on XRP, which led to a prolonged legal battle. Deaton expressed his frustration with the SEC’s handling of the issue, stating that he only asked for the SEC to honor the law and clarify that the token itself (XRP) was not the security, but the agency’s lawyers not only refused to do so but also attacked him personally. The SEC’s recent settlement with trading platform eToro, which forced its U.S. operations to cease trading in nearly all crypto assets and imposed a $1.5 million fine, is an example of the regulator’s ramped-up enforcement efforts in 2024.
In a report from Social Capital Markets, it was noted that the SEC’s total monetary enforcement actions against crypto firms in 2024 had surged to $4.7 billion, a 3,000% increase from the previous year. The regulator’s largest action came in June, when it reached a $4.47 billion settlement with Terraform Labs and its former CEO, Do Kwon, marking the SEC’s most substantial crypto enforcement to date. Additionally, a coalition of seven U.S. states has come together to challenge the SEC’s regulation of cryptocurrency, arguing that the agency’s attempt to regulate cryptocurrencies constitutes a power grab that would stifle innovation, harm the crypto industry, and exceed the agency’s authority. Overall, Deaton’s criticism of the SEC, along with the agency’s increasing enforcement efforts in the crypto industry, reflects the ongoing tensions between regulatory bodies and the cryptocurrency community.
