Crypto lawyer John Deaton has intensified his criticism of the U.S. Securities and Exchange Commission (SEC) over what he describes as its inconsistent and “head-spinning” approach to crypto regulation. As the SEC prepares for another court battle with Ripple Labs in the Secondary Circuit Court, Deaton, a vocal pro-crypto advocate and candidate for the Massachusetts Senate, argues that the agency’s regulatory practices have been contradictory, particularly in their stance on major crypto firms.

Deaton’s grievances with the SEC’s enforcement actions are compounded by its recent appeal of Judge Analisa Torres’ decision in the Ripple case, which found that XRP is not considered a security when sold to retail investors. This move, according to Deaton, underscores what he calls the “bizarre, hypocritical approach” the SEC has taken toward crypto regulation.

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Deaton’s Critique: SEC’s Crypto Regulation Lacks Consistency

Deaton, who is running against anti-crypto Massachusetts Senator Elizabeth Warren, took to social media to share his frustration, comparing the SEC’s regulatory stance to the erratic behavior of a character in The Exorcist. He argues that while the SEC targets platforms like Coinbase, Binance, and KuCoin for allegedly violating securities laws, it seemingly turns a blind eye when politicians, such as presidential candidate Kamala Harris, cash out crypto donations through these same platforms.

Deaton has long maintained that the SEC’s actions are creating more confusion than clarity in the crypto market. He highlights that the agency allowed Coinbase’s initial public offering (IPO) in 2021, only to later accuse it of operating as an unregistered securities exchange. “Two years prior to alleging Coinbase is running an illegal business, the same SEC…made a specific determination that accelerating Coinbase’s IPO was, in fact, in the public’s best interest,” Deaton stated.

SEC’s Enforcement-Based Approach Versus Regulatory Frameworks in Other Regions

The SEC’s reliance on enforcement rather than establishing a comprehensive crypto regulatory framework has drawn significant criticism. While other regions, such as Europe and Asia, are creating clear regulatory guidelines for digital assets, the SEC has focused on legal actions to address crypto compliance. The agency, led by Chair Gary Gensler, has issued numerous lawsuits against crypto firms this year, targeting them for alleged unregistered securities sales, while simultaneously losing several high-profile cases.

A central issue in the SEC’s approach is its use of the Howey Test, an established standard used to define what constitutes a security. This test has faced scrutiny, with critics arguing it fails to account for the unique characteristics of digital assets. In a recent amended complaint against Binance, the SEC even acknowledged the need to move away from the term “crypto asset security” to avoid blanket classifications for all crypto tokens.

Ripple Case and Potential Impacts of the Upcoming Presidential Election

The SEC’s appeal of the Ripple case ruling has reignited discussions on the agency’s regulatory future and its broader impact on the crypto industry. Deaton’s involvement as amicus counsel in the case has added momentum to the push for more transparent and supportive regulations for digital assets in the U.S.

The 2024 presidential election could become a significant turning point for the crypto regulatory landscape, with pro-crypto figures predicting shifts in policy that favor digital innovation. Deaton and other pro-crypto advocates believe that new leadership may prioritize a less enforcement-heavy approach, potentially fostering a clearer, more conducive environment for crypto innovation.

The cryptocurrency market has been captivated by GOAT, a digital token that recently surged from a modest $3 million market capitalization to a remarkable $800 million in just two weeks. This unexpected leap was fueled by a combination of AI chatbot promotions, heavy social media engagement, and the adoption of perpetual futures contracts on major exchanges.

The rapid rise of GOAT can be attributed in large part to Terminal of Truths, an AI chatbot active on X (formerly known as Twitter). This bot, designed for philosophical and internet culture commentary, began discussing GOAT after user mentions, causing a spike in interest and driving daily trading volume to $480 million. In only 14 days, the number of wallets holding GOAT ballooned to over 39,000. The hype around the token attracted major players, with Kraken, BitMEX, and Binance quickly listing GOAT’s perpetual futures contracts, allowing traders to take leveraged positions with up to 50x leverage.

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AI Chatbot Hype and Exchange Listings Fuel Surge

GOAT’s surge has highlighted the influence AI-powered bots have in the crypto space. Despite speculation around “sentient” AI, the Terminal of Truths bot is simply a Large Language Model (LLM) similar to other chatbots, responding based on patterns in its training data rather than independent thought. Nevertheless, its endorsements created substantial hype, adding GOAT to the list of AI-associated tokens like RUSSELL, which saw brief price spikes after similar mentions but quickly fell back, showcasing the volatility of such assets.

Industry analysts caution against over-reliance on AI narratives, treating these tokens similarly to memecoins driven by social media buzz. K33 Research suggests that investors focus on price trends rather than AI-based promotion stories, as these tokens’ appeal is often temporary. GOAT’s price is currently $0.6884, a drop of 8.78% within 24 hours as the market stabilizes following its initial spike. This price correction coincided with futures trading options going live across exchanges, providing long-term trading strategies for professional investors.

Perpetual Futures and Market Impact

The addition of perpetual futures contracts on platforms like Kraken and BitMEX marks a turning point for GOAT. These products, which have no expiration date, use funding rate mechanisms to align prices with spot markets, enabling long-term positions without the need to roll over contracts. However, the high leverage options pose increased risks for retail investors, prompting exchanges to issue cautionary notices about the potential for amplified losses.

The launch of GOAT’s futures contracts has added complexity to the market, drawing in both day traders and professional participants. Investors can now choose between spot trading and more sophisticated, leveraged positions. The structured investment products could potentially sustain GOAT’s market cap, even amid price fluctuations.

Community Engagement and Celebrity Endorsements

GOAT has led engagement metrics within the AI-related token market. Tech entrepreneur Marc Andreessen’s recent $50,000 Bitcoin donation to the Terminal of Truths AI bot coincided with further price increases, amplifying GOAT’s visibility across crypto communities. It’s now frequently listed alongside popular tokens like POPCAT and MEW, ranking among the top gainers on both centralized and decentralized exchanges.

As GOAT continues to expand across derivative markets, it enters a new phase, with heightened visibility drawing increased scrutiny from the crypto community. While some consider the token’s rise a fresh approach to community-driven engagement, others see it as a new iteration of the highly speculative memecoin market.

In 2024, more than a dozen South Korean cryptocurrency exchanges either closed or temporarily suspended their operations, resulting in nearly 34,000 users unable to access assets valued at approximately 17.8 billion won ($12.8 million). This development follows South Korea’s implementation of the Virtual Asset User Protection Act, which imposes strict regulatory requirements on crypto exchanges.

The Financial Services Commission (FSC) data shows that 11 exchanges have permanently closed, while three others—Oasis, Flata Exchange, and Btrade—temporarily halted services at the end of September. Users affected by these closures now face an uncertain path toward reclaiming assets, including both cash and cryptocurrency holdings, now locked within these platforms.

Key Exchanges Impacted

Among the impacted platforms, Cashierest—which shut down in late 2023—holds the largest share of customer assets at 13 billion won, followed by ProBit with 2.25 billion won and HTX (formerly Huobi) with 579 million won. In total, these shutdowns have frozen substantial user funds, sparking widespread frustration and concern among crypto investors in South Korea.

Meanwhile, Oasis, Flata Exchange, and Btrade currently hold about 30.7 billion won in assets combined. This sum includes 16.2 billion won on Oasis and 14.35 billion won on Flata Exchange, both of which suspended operations as they navigate compliance and review processes under the new legislation.

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Regulatory Challenges and Market Downturn

Rep. Kang Min-kuk, a member of South Korea’s People Power Party, noted that additional crypto platforms are likely to close or halt operations as regulatory compliance costs increase, and the market faces a downturn. Although the FSC has issued guidelines for returning users’ assets, successfully recovering these funds has proven difficult due to complex operational and legal barriers.

The Virtual Asset User Protection Act, which was passed in 2023, mandates higher transparency, improved asset protection measures, and increased reporting requirements for cryptocurrency exchanges, aiming to secure user funds and enhance overall market stability. However, the costs associated with meeting these standards have proven challenging for smaller and mid-sized exchanges, many of which opted to cease operations rather than face the financial burden of regulatory compliance.

What’s Next for South Korean Crypto Investors?

The sudden closures and frozen assets highlight the need for streamlined processes for asset recovery in the event of exchange shutdowns. While financial authorities continue to push for user asset recovery, challenges persist, especially for exchanges operating in precarious financial positions or those facing liquidity issues due to ongoing market struggles.

For South Korean crypto investors, the next steps may involve legal proceedings or assistance from regulatory bodies to facilitate asset recovery. However, as the regulatory landscape tightens, experts anticipate further consolidation within the crypto industry, with only larger, financially stable exchanges likely to withstand the pressures of regulatory compliance.