John Deaton's Accusations

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.

In a recent post on X, Deaton said 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, claimed the SEC's enforcement practices amounted to 'gross overreach,' significantly impacting small investors.

"The SEC's misconduct and gross overreach caused small investors over $15 billion. On behalf of those 75K small investors I represented, we do not accept the SEC's apology," Deaton wrote.

SEC Faces Scrutiny for its Aggressive Regulatory Stance

His criticism comes as the SEC has faced increasing scrutiny for its aggressive regulatory posture toward the crypto industry.

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. He highlighted that he intends to hold the SEC accountable, mainly since Senator Warren has been reluctant.

The critique of the SEC coincides with a surprising shift in the agency's stance regarding cryptocurrencies.

In a court filing shared by Coinbase's Chief Legal Officer, Paul Grewal, the SEC I am acknowledged that it no longer views cryptocurrencies as securities.

"The SEC regrets any confusion it may have invited. " By previously suggesting that tokens themselves were securities," the SEC's amended complaint against Binance included a notable statement.

SEC Settles with eToro

This represents a departure from the SEC's earlier position, particularly regarding XRP, which had been classified as a security in past legal disputes.

Deaton has long advocated for clarity in how the SEC regulates cryptocurrencies, arguing that the agency's actions have often needed more consistency. He pointed to the SEC's refusal to provide clear guidance on XRP, which led to a prolonged legal battle.

"All I asked was for the SEC to honor the law and make clear that the token itself (XRP) was NOT the security. The lawyers at the SEC not only refused to do so, but they attacked me personally," Deaton remarked.

Meanwhile, the regulator recently settled a case with trading platform eToro, forcing its U.S. operations to cease trading nearly all crypto assets and imposing a $1.5 million fine. This is just one example of the SEC's ramped-up enforcement efforts in 2024.

According to a Sept. 9 report from Social Capital Markets, 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.

Coalition of States Challenges SEC

The regulator's most significant action came in June when it reached a $4.47 billion settlement with Terraform Labs and its former CEO, Do Kwon. This settlement marked the SEC's most substantial crypto enforcement to date.

A coalition of seven U.S. states recently challenged the SEC's cryptocurrency regulation.

The states have filed an amicus brief, led by Iowa Attorney General Brenna Bird, arguing that the SEC's attempt to regulate cryptocurrencies constitutes a 'power grab' that would stifle innovation, harm the crypto industry, and exceed the agency's authority.