Warren Rival for Senate Race John Deaton Argues for Coinbase in SEC Challenge

• A Republican lawyer and crypto defender who hopes to be Sen. Elizabeth Warren’s opponent in the Massachusetts Senate race has filed a supporting brief in a Coinbase clash against the Securities and Exchange Commission.

• Coinbase wants to get a higher court to decide whether tokens that trade on secondary markets with no obligations on the tokens’ issuers should be considered securities.

• Deaton is arguing in favor of the exchange’s effort, saying the SEC is taking an unconstitutional shortcut in its accusations that certain token trading violates securities laws.

Lawyer-turned-politician John Deaton further reinforced his credentials as an outspoken crypto ally on Friday, filing a friend-of-the-court brief in Coinbase Inc.’s (COIN) effort to get a higher U.S. court to rule on a central question about when a digital token qualifies as a security.

Deaton, one of several Republican candidates vying for the chance to oppose Sen. Elizabeth Warren (D-Mass.), filed the amicus brief seeking to bolster Coinbase’s argument in its fight with the Securities and Exchange Commission (SEC). The exchange filed for a so-called interlocutory appeal earlier this month, seeking permission to get a separate ruling on a narrow legal argument – whether a digital asset transaction that poses no obligation to the original issuer of the asset should be considered an SEC-regulated investment contract.

Deaton contended that the “politically driven, compromised agency” leans on its interpretations of the legal tool known as the Howey test to define tokens permanently as securities, which is beyond its authority.

“The Howey test is a transaction-by-transaction analysis,” Deaton argued. “There are thousands of digital assets and thousands, sometimes millions, of transactions occurring on various blockchains. Because of this inconvenient reality, the SEC adopted an unconstitutional shortcut by effectively saying all transactions of the tokens violate securities laws.”

The lawyer had similarly weighed in during Ripple Labs’ clash with the U.S. securities regulator, establishing his reputation in digital asset circles.

As a Senate candidate, he must still defeat a handful of Republican candidates in the September primaries before he can face Warren in the November general election. Even if he gets that chance, polling in the state suggests Warren is highly likely to retain her Senate seat.

Deaton is scheduled to be among the speakers next month at Consensus 2024 in Austin, Texas.