Forbes Journalist Slams SEC, Says Agency Prefers ‘Regulation By Enforcement’ Rather Than ‘Regulation By Rules.’
Another top journalist slams the SEC’s crypto regulation style.
Roslyn Layton, a journalist at Forbes, has described the Securities and Exchange Commission’s “regulation by enforcement” tactic as manipulation through arbitrary decisions as well as a lack of process and rules.
The journalist asserted in a recent article that the increased number of SEC cases against cryptocurrencies that have been settled suggests that the agency does not have clear rules.
“Indeed, some 90 percent of SEC cases are settled rather than concluded in court. Such a high degree of enforcement and settlement suggests that SEC rules are not clear and possibly non-existent,” Layton said.
Layton: SEC Prefers Regulation By Enforcement
She noted that the recent SEC Chair’s Op-Ed article titled “The SEC Treats Crypto Like the Rest of the Capital Markets” is unfounded, given the number of cases that have been slammed against crypto companies.
“So many lawsuits suggest that the SEC prefers ‘regulation by enforcement (a lawsuit against a financial actor meant to extract a settlement) rather than regulation by rules,” she said.
She further writes:
“The unit counts some 200 (Crypto) lawsuits since its founding in 2017, with fraud being the subject in at least 80 investigations. The agency also reports the restoration of $2 billion in monetary relief.”
According to Layton, the Securities and Exchange Commission has dedicated hundreds of lawyers tasked with prosecuting companies for failing to comply with the agency’s rules, which still cannot be found on the SEC’s website.
However, Layton suggested that the agency could have urged some of these legal practitioners to draft clearer cryptocurrency regulations.
“Crypto actors have begged Congress and the SEC for clear rules for years, but it hasn’t happened. Gensler has been on the job for a year and a half. It’s time to get this done,” Layton added.
SEC’s Unclear Regulations Prompted Ripple Lawsuit
For Layton, while the SEC has continued to claim that all cryptocurrencies except Bitcoin are securities, it is a fact some crypto assets may be currency.
“This question of currency or security is at the heart of SEC v. Ripple Labs and the status of the digital currency XRP,” Layton added.
Notably, the SEC’s top leaders deliberated on whether XRP is a security for a while before William Hinman delivered the controversial ETH free pass speech.
Unfortunately, the SEC did not conduct an inquiry or rulemaking before proceeding to charge Ripple for violating U.S. securities rules during its 2013 Initial Coin Offering (ICO).
“The SEC further charges that Ripple should have known XRP was security from the ledger’s debut in 2013, even though the SEC itself didn’t know until it filed the suit in 2020,” she said.
Attorney Deaton Reacts
The article has prompted a series of reactions from cryptocurrency community members, including John Deaton, the attorney representing over 72,000 XRP holders in a class action against the SEC.
Note the note at the end.
Gensler Says Crypto Treated Just Like The Market; 200 SEC Lawsuits Say Otherwise. https://t.co/trwBXKaH6k
— John E Deaton (213K Followers Beware Imposters) (@JohnEDeaton1) August 28, 2022
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