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STORY TIME - Here's an oversimplified explanation of what the SEC (and most agencies) are and having been doing for years, and how I believe they've been abusing their statutory authority: Imagine you live in a world with the only animals being cats. 1/9
Now imagine that Congress gave the SEC the power to regulate cats. However, Congress didn't fully give a definition for a cat, but why would they need to? Every animal is a cat, so why specify? A little later, imagine the courts decided that the SEC and all agencies 2/9
are able to make reasonable determinations when it comes to powers granted to them under law where its not clear. Now imagine, one morning, out of nowhere, rabbits appeared in the world. The SEC looks at rabbits and says, "well, these are a lot like cats. 3/9
They have four legs, jump high, and have tails, must be a cat." They did this because they are able to make reasonable determinations. Their other alternative would have been to go to Congress and say, "hey, so awkward thing. Remember how you told us to regulate cats, 4/9
and cats were the only animal in the world, well, there's this new animal. It has some similarities with a cat, but also not really a cat, can you help?" And then Congress could turn around and say, "silly Jay Clayton, that's not a cat!! That's a new animal, a rabbit!" 5/9
Instead, the SEC decided to take the former approach and lump rabbits in with cats. BUT, the worst part was they let the rabbits believe for 8 years that they weren't a cat. The SEC could have also chosen to give guidance as to what was a cat and what wasn't, 6/9
but they decided that was too much work for them. In real life cats are investment contracts, and rabbits are XRP, and the reasonable determination is "Chevron Deference". Investment contracts were never formally defined in statute, 7/9
so the Courts made a rule as to what meets the qualifications (Howey Test). The SEC here has used its Chevron deference to determine that the way XRP was offered was an investment contract despite its numerous other alternatives. I believe this to be an abuse of power. 8/9
The problem is: a rabbit is not a cat, and XRP was not offered in an investment contract (actual or implied). Yes, there are similarities between the two, but similarities are not enough. 9/9 P.S. yes, I know lawyers will find many things wrong with this as it is oversimplified
