Financial Times editor slams the SEC’s overreach, saying the move could be devastating for efforts to keep American markets fair and stable.
The Securities and Exchange Commission’s (SEC) quest to regulate the crypto industry has been put under the spotlight by leading media outlet Financial Times.
In a recent editorial, Brooke Masters, a Financial Editor at FT, urged the SEC to “be wary of overreach when tackling crypto.” She said it is an unwise move by the SEC to attempt to fill in new asset classes into old definitions.
“Trying to shoehorn new asset classes into old definitions is not the wisest course,” said Masters.
SEC Overreach Could Affect Efforts to Keep American Markets Fair
With the SEC focused on protecting investors, Masters said it is natural for the agency to attempt sweeping crypto products into its ambit, given the incidents that have emerged in the past few months.
Masters highlighted Bitcoin’s volatility and the FTX collapse as events that have cost many investors billions of dollars.
However, the Financial Times editor noted that crypto laws are unclear. She added that the consequences of the SEC’s overreach could negatively impact efforts to keep the American market stable and fair.
“Expanded investor protection is normally a reason to cheer, but these efforts to push out the regulatory perimeter are fraught with risk, particularly for the SEC,” she said.
Masters added that the key standards in determining securities lie in the Howey Test, which emerged from an 80-year-old Supreme Court case.
Federal Judge Applied Howey in Ripple Verdict
It is worth noting that the Howey test became the subject matter of the SEC v. Ripple lawsuit. In its argument, the SEC claimed that Ripple’s past sales satisfied various prongs of the test, thus indicating that the company violated securities laws.
Interestingly, New York Federal Judge Analisa Torres applied the Howey test to Ripple’s XRP transactions SEC claimed were securities. She found that Ripple violated securities laws via its past sales of XRP to institutional clients but that the company’s programmatic sales and other distributions are not securities.
Supreme Court Could Limit SEC Authority If It Appeals Ripple Ruling
Not satisfied with the decision, the SEC requested permission to file a motion for interlocutory appeal. As reported earlier, Judge Torres approved the request, and the agency is expected to file the motion later today.
According to Masters, the SEC’s decision to appeal the Ripple ruling could pave the way for the US Supreme Court to limit the agency’s authority on multiple issues.
“The SEC’s appeal could create an opening for the conservative Supreme Court majority, which is already talking about regulatory overreach, to crimp SEC authority on a wider range of issues,” she added.
Furthermore, the Financial Times editor urged Congress to establish new rules empowering the SEC to set crypto standards.
She added that the SEC could help investors in other ways, including approving a spot bitcoin ETF that would be under the agency’s regulatory purview.
