SEC is ‘Overzealous Traffic Cop’ on Crypto Regulation, Must Be Investigated, US Congressman Says

Updated: 14 July 2023

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The US Securities and Exchange Commission (SEC) must be investigated for its “haphazard and heavy-handed approach’’ to regulating the cryptpo industry, a US Congressman said.

“@SECGov is acting like an overzealous traffic cop arbitrarily ticketing drivers while keeping the speed limit a secret,’’ US Representative Ritchie Torres wrote on his twitter account. “It prefers to communicate by enforcement rather than by rules or guidance. But that’s no way to regulate digital assets.’’

🚨 @SECGov is acting like an overzealous traffic cop arbitrarily ticketing drivers while keeping the speed limit a secret.

It prefers to communicate by enforcement rather than by rules or guidance. But that's no way to regulate digital assets.

I'm calling for an investigation. https://t.co/ZbiSk6oQ9F pic.twitter.com/n0hijAREDC

— Rep. Ritchie Torres (@RepRitchie) July 13, 2023

Torres called specifically for an examination into what he called the SEC’s failure to create a rigorous but workable process for registering real-world digital assets platforms, and also into what he called “an unusual backroom deal’’ to grant a special purpose broker-dealer licence to Prometheum, “a trading digital assets platform that does not trade digital assets.’’

Prometheum is a controversial and mysterious entity that has been accused of having compromising relations with China. Six other lawmakers have also called for it to be investigated. Torres called it “a Potemkin platform’’ and not a true trading platform for crypto assets.

Excellent letter from @SenTuberville, @RepBlaine, @RepDonaldsPress, @RepRalphNorman, and @RepMarkAlford highlighting the glaring inconsistencies between under-oath Congressional testimony from @PrometheumInc CEO Aaron Kaplan and Prometheum’s very own SEC filings. pic.twitter.com/QMWt9nwJoq

— Alexander Grieve (@AlexanderGrieve) July 10, 2023

SEC Regulation Lacks Clarity

“Clarity is the cornerstone of compliance,’’ Torres wrote in letters to the SEC’s Inspector General Deborah Jeffrey and the Government Accountability Office’s Comptroller General Gene Dodaro. “Yet the SEC refuses to bring even the barest amount of clarity to the application of securities law to digital assets.’’

The call for an investigation into the SEC comes as the regulator suffered a partial setback in its legal action against Ripple Labs Inc. that argued its payments token XRP is a security.

A US district court ruled yesterday that XRP is not a security when it is sold to the public even though it is when sold to institutional investors. Crypto assets surged on the news with XRP up about 67% since the ruling.