Deaton Says SEC Could Sue Elon Musk if He Allows Only DOGE Payments on Twitter

Deaton believes such an outcome would not be unreasonable under the current SEC regime.

Attorney John Deaton has asserted that it would not be unreasonable to believe that the US Securities and Exchange Commission will sue Elon Musk if the billionaire decides to accept only DOGE payments on Twitter.

The lawyer made this known in a tweet yesterday. According to Deaton, the regulator under its present leadership could sue the billionaire and classify the doggy-themed meme coin as an unregistered security.

Here’s a thought:

If @elonmusk allowed for payments over @Twitter but ONLY allowed #DOGE, would he be at risk that the SEC would sue him claiming #DOGE is an unregistered security?

The answer should be: that’s a ridiculous thought. But with today’s malicious SEC, is it?

— John E Deaton (@JohnEDeaton1) January 31, 2023

The tweet comes on the back of the regulator’s insistence on regulating the crypto space through enforcement actions as the SEC chair, Gary Gensler, insists that there is no need to create rules for the emerging market. According to Gensler, most cryptocurrencies, except Bitcoin, are securities and, as such, are covered by existing traditional finance rules. 

Moreover, the SEC’s claims in its enforcement actions against crypto entities have raised concerns among industry participants and observers.

For example, in its case against Ripple, it asserts that XRP would be a security no matter how it is used. Notably, this stance contravenes securities law, as often pointed out by Deaton, who represents thousands of XRP holders as a friend of the court in the legal battle.

Deaton has explained that while anything can be packaged as an investment contract or investment in a “common enterprise,” it does not make the underlying object a security. As explained by the lawyer, following the SEC’s present logic, orange groves are securities as they were the underlying tokens in the often cited Howey case.

Most recently, the SEC launched legal action against Gemini and Genesis Trading for offering an unregistered security via Gemini’s Earn program. Notably, the case has raised eyebrows for several reasons. For one, the SEC has been aware of the product for over a year and did nothing while preventing Coinbase from launching a similar product without explanation.

However, it opted to launch litigation after Gemini halted customer withdrawals as Genesis failed to make payments to the crypto exchange. Consequently, stoking speculation that the SEC is not acting in the interest of consumers but in the interest of its ambitions to extend its authority to the crypto markets, as bringing the case now allows for more sensationalism.

Musk to Add Twitter Payments

Notably, Deaton’s comments follow reports that the Twitter chief is working on adding payments to the social media platform to boost revenue. Not much is known about the proposed payment system, but reports indicate that the company is already applying for licenses and developing the software.

Unsurprisingly, the reports have led to speculation that the meme coin will be integrated as part of the feature due to Musk’s love for DOGE. This speculation caused the token to surge by as much as 10% yesterday.

It is worth noting that Musk already has a rocky relationship with the SEC. As part of a 2018 settlement with the regulator on securities fraud charges for posting that he had secured funding to take Tesla private, Musk is restricted from making disclosures about Tesla on Twitter.

The billionaire is now fighting this restriction, arguing that it violates his right to free speech.