The scrutiny against the Securities and Exchange Commission (SEC) has reached a fever pitch this week, with damning allegations that the agency “broke the law” in its issuance of the controversial Staff Accounting Bulletin No. 121 (SAB 121).
Perhaps no voice has been as critical or impactful as that of John Deaton.
In a tweet, Deaton stated: “This is a clear statement from a federal agency that the SEC broke the law.” His tweet is more than a casual observation—it’s an indictment of the SEC’s entire approach to governance and law enforcement in the crypto space.
Deaton referenced a Ripple lawsuit where a federal judge said the SEC’s lawyers “lack a faithful allegiance to the law.”
This damning assertion draws attention not just to the SEC’s controversial SAB 121 but its entire mode of operation. Deaton raises an existential question about the SEC: Is the institution that’s supposed to protect investors doing more harm than good? And has it deviated so far from its mission that it has become “inept and corrupt”?
The Government Accountability Office (GAO), by declaring SAB 121 should be subject to Congressional review, provides weight to Deaton’s accusations. The GAO stated that the bulletin must be submitted to Congress, effectively torpedoing the SEC’s earlier claim that it wasn’t a “rule” as defined under the Congressional Review Act (CRA).
Industry leaders like Jake Chervinsky have aligned themselves with GAO’s Declaration. Chervinsky stated that SAB 121 was “illegal from the start” and caused “extraordinary damage” to the crypto industry. This ensemble of voices raises serious questions about the SEC’s authority and credibility.
With a bipartisan bill introduced to counter SAB 121 and a 60-day Congressional review period looming, the SEC finds itself in an insecure position. The question isn’t just whether SAB 121 will survive this review but whether the SEC itself can weather this storm of credibility.
As Deaton’s tweet echoes through legal circles, crypto forums, and beyond, the SEC faces not just a review of a specific rule but a crisis of institutional faith. The following 60 days could be a crucial moment for crypto regulation and the SEC.
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