Former SEC chief claims agency’s crypto enforcement has collapsed

John Reed Stark, the former head of the U.S. Securities and Exchange Commission’s (SEC) Office of Internet Enforcement, expressed his view that the SEC’s efforts to regulate the cryptocurrency industry have failed.

Stark, who served at the SEC for over two decades and is a vocal critic of the crypto sector, cited recent legal actions involving Coinbase (NASDAQ:COIN) and Binance as evidence of a wider pullback by the agency. He suggested that the ongoing legal dispute with Ripple would likely follow a similar trajectory.

Stark’s observations come after the SEC informed the Second Circuit on Friday that its newly established Crypto Task Force might help resolve the case against Coinbase.

This led to a slight postponement in responding to Coinbase’s appeal. Stark interpreted this as an indirect admission of defeat by the SEC, remarking, "Translation: Stick a fork in the SEC’s case against Coinbase, it’s done." Additionally, last week, the SEC and Binance agreed to a two-month break in their enforcement case, pointing to a change in the regulatory approach.

The former chief also noted an internal reorganization at the SEC, highlighting the sudden reassignment of a key trial attorney who had been successful in crypto enforcement.

Stark remarked on the shift, indicating that the attorney was moved from a significant role to a less impactful position. He also mentioned that current crypto cases are being managed by a legal team based at the SEC’s headquarters in Washington, D.C., under the direction of the acting SEC Chair.

Stark forecasted a comprehensive cessation of the SEC’s crypto enforcement actions. He anticipates that all SEC crypto-related investigations will come to an abrupt stop and that the SEC will either pause all crypto-related litigation or seek to settle or dismiss these cases quickly and with terms favorable to the defendants.

Specifically, Stark predicted that the SEC’s appeal in the Ripple case might be halted or completely withdrawn. He concluded that despite previous court rulings classifying digital assets as securities, these decisions are now irrelevant.

Stark criticized the SEC’s current enforcement capabilities, stating that regardless of the terminology used by the SEC’s leadership to describe the halting of cases against Binance, Coinbase, and potentially Ripple, the agency’s ability to enforce crypto regulations is effectively over.

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