Coinbase Could Have a Better Fair Notice Defense Than Ripple: Deaton

Deaton says an SEC v. Coinbase case would take the fair notice defense a notch higher.

CryptoLaw founder Attorney John E. Deaton has asserted that Coinbase could have a better fair notice defense than Ripple as it faces potential enforcement action from the United States Securities and Exchange Commission (SEC).

For context, a fair notice defense asserts that the rules were not clearly stated to give fair notice of what contradicts it. Ripple backs this by citing statements from Bill Hinman, the former SEC director of the Division of Corporation Finance. In 2018, he asserted that assets on sufficiently decentralized networks, naming Bitcoin and Ethereum as examples, did not constitute unregistered securities. Consequently, it came as a surprise to some when the SEC chose to launch an enforcement action against Ripple over XRP two years down the line.

Quoting a previous tweet today, Deaton asserted that an SEC v. Coinbase case would take the fair notice defense a magnitude higher. Notably, in the previous tweet, the attorney had pointed out that just two years earlier, the SEC had approved Coinbase’s Initial Public Offering based on the same disclosures the SEC now says potentially violate investor protection laws.

Consequently, Deaton points out that if Judge Analisa Torres ruled in favor of Ripple’s fair notice defense in the SEC v. Ripple case, Coinbase would be in a significantly solid position. 

“If she agrees with Ripple that a jury must decide whether Ripple received fair notice (or she decides as a matter of law that no reasonable jury could conclude Ripple did), it will mean the Crypto Fair Notice Defense has real teeth and Coinbase will be sitting pretty,” the attorney wrote.

If she agrees with Ripple that a jury must decide whether Ripple received fair notice (or she decides as a matter of law that no reasonable jury could conclude Ripple did), it will mean the Crypto Fair Notice Defense has real teeth and Coinbase will be sitting pretty.

— John E Deaton (@JohnEDeaton1) March 23, 2023

As highlighted in a report yesterday, the leading U.S. crypto exchange disclosed on Wednesday that it had received a Wells notice from the SEC. The letter indicated the agency’s intent to pursue enforcement action against the crypto exchange over an unspecified portion of assets listed on the platform for trading, its staking service, and its self-custody crypto wallet. 

Meanwhile, Deaton, in a separate tweet today, speculates that Coinbase would not be the only one to receive a Wells notice. The attorney opines that the SEC aims to “crush the market” so legacy financial institutions can get a bigger stake.

I seriously doubt Coinbase was the only exchange. I assume @krakenfx, @BinanceUS, @binance and the others have all received Notices or will soon. The SEC doesn’t have the resources to fight everyone. This is about crushing the market so incumbents can get in.

— John E Deaton (@JohnEDeaton1) March 24, 2023

As reported today, the attorney has launched a new advocacy campaign to alert congress of perceived SEC overreach through CryptoLaw’s “Connect to Congress” portal. Per the attorney, the portal has sent over 2,000 messages so far, reaching all congress members.