Ex-SEC Chief Claims Agency Overreaches Authority on Crypto Rules

Reed Stark Claims SEC Usurps Congressional Authority On Crypto Rulemaking

After the CLARITY Act failed to pass cloture on Tuesday over several issues, the Securities and Exchange Commission (SEC) has vowed to step in to provide much-needed clarity to the industry.

In August, SEC Chair Paul Atkins unveiled a package of exemptions known as Regulation Crypto Assets, designed to, in his own words, “facilitate capital formation and allow crypto asset innovation to flourish in the United States in the years ahead.”

Nonetheless, this deregulation plan has detractors. John Reed Stark, founder and former chief of the SEC’s Office of Internet Enforcement, with over 18 years in the agency, believes Atkins’ push to deregulate the crypto industry and open the ecosystem to mainstream investors is illegal and usurps Congressional authority.

Reed Stark stressed that Atkins’ plan “exceeds the SEC’s exemptive authority under Securities Act Section 28 and Exchange Act Section 36,” and that it disregards the agency’s own decades of litigated positions, contradicting its previous actions.

In a brief posted on social media channels, Reed Stark blasts the proposed SEC safe harbor provision for investment contracts, highlighting its alleged defects and illegalities. The rule would let issuers self-certify their instruments as non-securities, subdelegating the definition of an instrument to their promoters.

To Stark, the SEC has no business deciding Congress matters, especially after the CLARITY Act failed to pass a cloture vote, invoking the major questions doctrine over this subject.

“The CLARITY Act’s tortured journey is not, as Atkins will undoubtedly claim, irrelevant legislative noise. It is the single most probative fact in the case: living, docketed, roll-call-voted proof that the crypto market-structure question belongs to Congress. The rule is an attempt to disappear and moot the U.S. Senate,” he assessed.

Reed Stark told Atkins to “get ready for a fight,” stating that the Regulation Crypto Assets proposal would not survive federal scrutiny, prompting a possible legal fight over this new stance on crypto assets.

“Stay tuned indeed, Chairman Atkins. And fail not at your peril, Chief Ponzi Officer,” Reed Stark concluded.