John E. Deaton, the founder of CryptoLaw and the attorney representing thousands of XRP holders in the longstanding Ripple-SEC legal tussle, has reacted to the recent enforcement action against Coinbase by the SEC.
The United States Securities and Exchange Commission handed out a Wells Notice to Coinbase, the leading U.S.-based crypto exchange on Wednesday.
This notice indicated that the securities watchdog plans to take Coinbase to court over some crypto assets listed on the crypto exchange for trading, its staking service, and its non-custodial crypto wallet.
Reacting to this, Deaton believes the SEC would take similar enforcement actions against other United States-based exchanges. According to him, the potential SEC v. Coinbase lawsuit would raise the crypto Fair Notice Defense to a higher level.
He further implied that Coinbase would have a better chance at winning the potential SEC lawsuit if Ripple’s fair notice defense in the ongoing lawsuit stands.
A fair notice defense — which contends that rules were not clearly defined beforehand to give prior information of what contradicts it — is among the defense approaches adopted by the San Francisco-based crypto solutions company to battle with the SEC.
In the words of John Deaton:
“Judge Torres doesn’t reach the Fair Notice Defense unless she finds that Ripple offered/ sold XRP as an investment contract at some point (whether during 2013-2017 or today).”
“If she agrees with Ripple that a jury must decide whether Ripple received fair notice (or she decides as a matter of law that no reasonable jury could conclude Ripple did), it will mean the Crypto Fair Notice Defense has real teeth and Coinbase will be sitting pretty.”
If she agrees with Ripple that a jury must decide whether Ripple received fair notice (or she decides as a matter of law that no reasonable jury could conclude Ripple did), it will mean the Crypto Fair Notice Defense has real teeth and Coinbase will be sitting pretty.
— John E Deaton (@JohnEDeaton1) March 23, 2023
This SEC action has raised many concerns as the same regulatory agency approved Coinbase’s Initial Public Offering in 2021 wherein Coinbase provided a detailed statement describing its platform and how it lists assets, etc.
In another tweet, Deaton concluded that the SEC is only attempting to squash the crypto market so that legacy financial institutions can get a bigger stake in the crypto industry.
“The more that I think about the SEC’s war against crypto including the recent Coinbase Wells Notice, the more I’m convinced the end game is to try and allow the incumbent a major piece of the industry,” he said.
I seriously doubt Coinbase was the only exchange. I assume @krakenfx, @BinanceUS, @binance and the others have all received Notices or will soon. The SEC doesn’t have the resources to fight everyone. This is about crushing the market so incumbents can get in.
— John E Deaton (@JohnEDeaton1) March 24, 2023
Recall that last month, the SEC issued a Wells Notice to Paxos over the Binance-branded stablecoin BUSD while it sued Kraken, levying a fee of $30 million for settlement. Coinbase condemned the SEC over the actions, calling for clear regulations.
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