Ripple’s CTO David Schwartz and Attorney John Deaton highlight four pieces of legal advice the SEC is indirectly giving US-based crypto projects.
Schwartz made this known following a recent discussion about SEC chairman Gary Gensler’s stringent regulatory policies within the crypto space.
Notably, pro-XRP lawyer John Deaton started the discussion by slamming Gensler for having no clue about what constitutes a security.
Per Deaton, Gensler believes that if someone promotes an asset, it automatically becomes a security. He added that Gensler ignores the fact that the securities laws do not apply to purchases made for non-investment purposes.
Interestingly, an XRP enthusiast pointed out that the SEC used the same tactic to “bully” Stoner Cats 2 LLC into a settlement. The user said the SEC cited three “solitary tweets” as evidence against the company behind Stoner Cats non-fungible tokens (NFTs).
Ripple CTO Shares 3 Legal Advice
Reacting, Schwartz highlighted three pieces of legal advice that the SEC’s enforcement action is indirectly giving to crypto projects.
Schwartz noted that the SEC is forcing crypto projects not to give U.S. regulators jurisdiction.
In addition, the Ripple CTO said the SEC is indirectly advising crypto businesses not to be honest about their future plans.
Furthermore, he stated that crypto projects may avoid giving any perception that suggests they are making efforts. He questioned how these pieces of advice tend to protect U.S. investors.
The net effect is that projects are being given three pieces of legal advice:
1) Avoid anything that would give US regulators jurisdiction.
2) Avoid truthful disclosure of future plans.
3) Avoid perception that you are making efforts.
How does that protect investors exactly?— David "JoelKatz" Schwartz (@JoelKatz) October 1, 2023
Deaton Adds Another
Commenting, Attorney Deaton referred to Schwartz’s instructions as the “actual legal advice in the U.S.”
Notably, Attorney Deaton added a fourth piece of advice, warning crypto projects not to communicate or cooperate with anyone at the SEC without first speaking with their attorney.
“If they [SEC] ask for your business name or address, refer them to your attorney. If you get a subpoena, don’t immediately comply – instead, call your attorney,” Deaton added.
Great summary of actual legal advice in the U.S. I would only add:
4) Under no circumstances are you to cooperate with or talk to anyone at the SEC. If they ask for your business name or address refer them to your attorney. If you get a subpoena, don’t immediately comply -… https://t.co/uGnmWqBt3s
— John E Deaton (@JohnEDeaton1) October 1, 2023
Crypto Actors Slam SEC Enforcement Actions
Crypto players have criticized the SEC for its continuous enforcement actions against crypto businesses. For many, the SEC prefers to regulate the industry using enforcement actions instead of establishing clear rules.
However, the SEC has maintained that the securities laws are clear while inviting crypto businesses to “come in and register.”
As reported earlier, Ripple’s Chief Legal Officer Stuart Alderoty described the invitation as a bait-and-switch trap. He noted that while the SEC knows there is no path to registration, it uses enforcement actions to bully and bulldoze responsible actors.
Disclaimer: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic’s opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.
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