The Securities and Exchange Commission (SEC) has been accused of failing to provide clarity on how it determines whether a digital asset is a security or not. Despite the regulator’s insistence on providing clarity, digital asset investors and blockchain project developers believe the SEC provides no such clarity, resulting in market confusion.
This confusion has led to what many call “regulation by enforcement.” However, it is the holders of the XRP digital currency that have been hit the hardest. They believe the SEC’s lawsuit against Ripple Labs and its executives in December 2020 was unfair and crashed the value of their holdings, leading to massive panic selling and $15 billion in losses to retail investors.
John Deaton, the founder of CryptoLaw, petitioned the court to intervene in the case on behalf of over 75,000 digital asset holders, and was granted “friend of the court” status by Judge Analisa Torres of the Southern District of New York. The SEC opposed letting Deaton and others participate in the case, arguing that all XRP holders should have known that XRP was a security from 2013 until the present day.
In response, these investors have gathered evidence that supports their claim that the SEC failed to provide fair notice to the markets, allowing for picking winners and losers rather than providing equal protection to all investors. Furthermore, the evidence suggests unfair advantages were granted to insider investors by senior SEC officials with conflicts of interest.
The SEC’s failure to provide clarity on digital asset regulations has resulted in unfair treatment of investors and a lack of confidence in the market. Until this is achieved, the market will continue to suffer from confusion and uncertainty.
