In a recent tweet, prominent crypto influencer Mr. Huber issued a challenge to Gary Gensler, Chairman of the US Securities and Exchange Commission (SEC). Mr. Huber criticized Gensler’s broad strokes approach to classifying cryptocurrencies, focusing on Gensler’s assertion that “most tokens are securities.”
It’s very simple: Gary Gensler never talks about how tokens were sold in a specific offering, he always talks about tokens being securities. He doesn’t say, “I think most tokens were sold as securities in an offering.” He says, “I think most tokens are securities”. I could add…
— Mr. Huber🔥🦅🔥 (@Leerzeit) August 7, 2023
Breaking Down the SEC’s Token Stance
Huber raises an interesting point by asserting that Gensler often seems to overlook the complexities of token offerings, focusing instead on blanket statements that categorize most tokens as securities. This approach, according to Huber, fails to acknowledge the nuances in token sales and the specific circumstances surrounding each offering.
The crypto KOL further quoted SEC commissioners such as Heister Peirce, who has expressed frustration over the SEC’s tendency to label tokens themselves as securities.
“Write a generic answer that a SEC chairman can give to any question, while appearing to be highly competent on this topic but without saying anything.” pic.twitter.com/s85sbAZzLR
— Mr. Huber🔥🦅🔥 (@Leerzeit) August 7, 2023
Huber highlighted the ongoing narrative, often played out in litigation, where the SEC argues that tokens in the secondary market are also embodiments of securities. Despite the constant pushback against these claims, Huber anticipates that critics will persist in their attempts to deny the SEC’s generalized approach to tokens.
An Unconstitutional Expansion of Howey?
In a separate tweet, lawyer and founder of CryptoLawUS, John Deaton, dissected the SEC’s controversial stance on cryptocurrencies. Deaton discussed how Gensler testified under oath about crypto exchanges falling into a “regulatory gap” between the SEC and the Commodity Futures Trading Commission (CFTC). However, Deaton also pointed out that the SEC has maintained its jurisdiction over digital assets despite these proclamations.
Diving deeper into the concept of jurisdiction, Deaton warned that the SEC’s enforcement actions could indeed commit “violence to the separation of powers” if they lack jurisdiction over digital assets and crypto exchanges.
As an example, Deaton pointed out how an expansion of the Howey Test — a test that defines what an investment contract is — to cover asset purchases like software code sales could be seen as unconstitutional. He strongly asserted that such an extension could potentially infringe on the separation of powers.
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