John Deaton Podcast Transcript
John Deaton joins host Brian Thomas on The Digital Executive Podcast.
Brian Thomas: Welcome to Coruzant Technologies, home of the Digital Executive podcast.
Welcome to the Digital Executive. Today’s guest is John Deaton. John Deaton is widely regarded as a preeminent authority on cryptocurrency and its regulation. He founded Crypto Law US, a platform dedicated to providing legal insights into the crypto industry. Deaton has served as amicus counsel and landmark crypto related cases, including SEC versus Ripple and Coinbase litigation.
Notably in the Ripple case, this presiding judge referenced Deaton’s brief and advocacy efforts when ruling that XRP does not qualify as a security, a significant victory for the crypto community. A frequent guest on Fox Business Deaton has shared his expertise with host like Maria Bartiromo, Charles Payne, Liz Kleiman, and the Fox and Friends team offering nuanced perspectives on crypto’s evolving landscape beyond his legal and media presence.
Deaton is a former US Marine and federal prosecutor. Bringing a disciplined and principled approach to his work. Recently, he challenged Senator Elizabeth Warren in a high-profile senate race in Massachusetts, amplifying his influence in both legal and political spheres.
Well, good afternoon, John. Welcome to the show.
John Deaton: Thank you for having me.
Brian Thomas: Absolutely. I appreciate you making the time. Former Marine, I like myself, so I always like to have Marines on the show. You’re probably like my eighth double dog that’s been on the show, so I appreciate that. John.
John Deaton: Oorah Semper Fi
Brian Thomas: Semper Fi, hailing outta Massachusetts.
I’m in Kansas City. Let’s get this show under the road. Let’s jump into your first question as amicus counsel in the SEC versus Ripple case, famous case. How did your advocacy influence the court’s decision regarding XRP status and what implications does this ruling have for the broader crypto industry?
I. It’s a great question, and you know, a lot of times you don’t know if the advocacy that you’re involved in, if it’s gonna make a difference, you hope to get the judge’s attention. But in this case, in the Ripple case, we have conclusive proof that our efforts XRP holders made a difference because the judge cited the affidavits and what people need to know.
It had never been done, but we filed a motion. To intervene the case as defendants a CLA putative class action. At the time, it was 12,600 XRP holders. It grew to 75,000 XRP holders from 143 different countries around the globe, and we went into the court and said, look, you know, these allegations by the SEC are so overbroad.
They’re not limited to just Ripple or Ripple, CEO or chairman of the board and their executive transactions. But you’re saying that the XRP that I hold, that my daughter holds, or that regular people hold that bought him on Coinbase or Kraken, who’ve never heard of RIP or Brad Garland house, that those are illegal securities.
That’s so overbroad. It’s never been done. You can’t rely on the efforts of a company or promoter that you don’t even know exists. And so the judge denied my motion to intervene as defendants because. She can’t force the SEC to sue 75,000 people, but she appointed me as Amicus counsel. I submitted about 4,000 affidavits of XRP holders, and some people acquired it for non-investment purposes to send cross-border payments.
So they were developers and it made a huge difference because the judge cited those affidavits when she declared XRP itself, not a security. I. And in that case, Brian, there was over 2000 exhibits and in her final decision she cited a few dozen of the 2000, and one of ’em was the XRP holders affidavits.
And so we really did make a difference and it showed that a decentralized form of justice, if you will, where people came together for this one cause against government overreach. So it’s something I’m very proud of, be a part of.
That’s awesome. And I watched that case pretty closely actually. There was so much going on around it.
There’s a lot of influencers in the Web3 blockchain, crypto space here, as you know, and just a lot of hype. But absolutely, I think the government, the SEC in this case definitely had some overreach, and I’m glad that this community, this decentralized community came together to support Ripple. Thank you, John.
Jumping into the next question, you’ve been vocal about the SEC’s enforcement actions against crypto firms, describing them as lacking clarity and consistency. Could you elaborate on your concerns and suggest how the SEC might improve its regulatory framework?
John Deaton: Yeah. You know, if we go back to 2018, Hester Purse, who is an SEC commissioner, nicknamed crypto mom, she had proposed a safe harbor provision because what we’re doing, Ryan, is we’re basically trying to apply 1930s statutes in a 1946 Supreme Court.
Case called Howie, which dealt with orange groves to modern day blockchain technology, artificial intelligence, quantum computing, automation, robotics. You go on modern day technologies, why are we applying, you know, 1930s law? Because you can’t pigeonhole it and Congress has enacted. So the SCC should be providing guidance.
In 2018, the only thing that was produced was the Bill Hinman speech that said Ethereum was sufficiently decentralized to not be a security, but they never defined what sufficient decentralization is, and there is no Howie factor on sufficient decentralization. So it really. Create a lot of vagueness and we learned that the SEC under someone like Gary Gensler, they prefer it to be vague.
They prefer it to be opaque because it allows them to have maximum prosecutorial options and they can engage in regulation by enforcement. And I think to show how absurd it was, the best example I’d give you wouldn’t be the Ripple case, even though that’s a pretty good example. It’d be the Coinbase case because.
Coinbase went to the SEC and said, you know, we’re gonna list XRP, but tell us if we shouldn’t. And the SEC didn’t say anything. They listed XRP, but then Coinbase went to the SEC and said, we are gonna file an IPO and go public, and we want you to accelerate. The IPO and Brian, what everybody needs to understand in order to get acceleration.
The SEC has to make a determination that it’s in the public’s best interest for that IPO to be accelerated. The SEC did that. They made a determination. Coinbase, this is good. It’s in the public’s good to do this, granted the acceleration, and two years later, Gary Gensler, the same SEC, sues Coinbase and claims the entire business model of selling XRP or Solana or Cardona or any of these other tokens that it’s an illegal operation.
Now that’s just. Clearly absurd. Where you on one hand say it’s in the public’s best interest, and two years later it’s an entire illegal operation that needs to be sued and they need to come in and register. And that’s what happens. And that’s why there was this war on crypto and then the Kraken case and the investigations into Robinhood and Gemini.
There were over 300 wells notices on crypto. We had the choke 0.2 0.0 operation where de banking was going on. There was a real war against crypto. It’s not imagined. The SEC and Elizabeth Warren, Gary Gensler and the government had its boot on the neck of the industry and that’s all been lifted. And so it’s a good thing because.
In my opinion, you were sending innovation overseas. People wanted to have access to this asset class, and so they went to the FTX and, and the bad guys and had they fostered innovation here in America and provided the safeguards and some consumer protections, we’d be so far ahead of the game than we are.
But the good news is sunlight is. Broken through and, and the industry is looking to be, uh, to have the regulatory clarity that it’s so desperately needed for the last four years.
Brian Thomas: Thank you. I appreciate that, and I think with the new administration we’ll get a lot of that support as well. Again, we’ve got folks that just are still staunchly anti decentralization in crypto, as you know.
Appreciate you highlighting that Coinbase lawsuit, obviously, it’s funny how that works. Hypocrisy is an everyday thing in federal regulations it seems like. So thank you. The next question for you, John, what insights did you gain from your recent senate campaign in Massachusetts and how did you plan to continue advocating for cryptocurrency issues?
John Deaton: In the political arena. No one was stepping up. I knew what my chances against Elizabeth Warren, you know, were slim. I, I didn’t announce until February 20th. That’s extraordinarily late. It’s only, you know, six, seven months before the actual election doesn’t give you much time, especially for someone like me who didn’t have name recognition in the state.
I’ve been a lawyer for 25 years in Massachusetts, but you know, the general public doesn’t know who I was or they didn’t, but no one was stepping up and I couldn’t understand. Brian, why the senator from Massachusetts was running on an anti crypto platform. She had a whole poster out saying, went viral online of she’s building an anti crypto army.
And, and I was sitting back trying to figure it out because, you know, Massachusetts the second most expensive state in the country to live housing crisis, uh, immigration crisis here, because we have a right to shelter law that doesn’t require residency. So the illegal immigration issue was. Bankrupting us as a state costing over $2 billion a year, inflation, all these things.
And why is she focused on crypto and, and trying to ban it. And her bill that was written by the Banking Policy Institute of America, led by JP Morgan Chase and, and Jamie Diamond’s, the chairman, banned. The self custody of Bitcoin, and so I, I couldn’t understand it. Then she went on, Chuck Todd’s meet the press and said that America was ready for a federal reserve issued Central Bank digital currency.
Then, you know, I said, wow, this is where we’re headed. So I felt obligated to get in the race, and, you know, I was proud of it because on our first debate she stood up and said, oh, I, I don’t have a problem with people buying and selling crypto and. Of course that’s a 180 from what her bill did. So success is always relative and the political landscape, you know, I learned a lot running how important money is and, and the role that that plays.
But I can tell you this, we’ve won in the sense that her anti crypto agenda really. Cost the administration. It didn’t cost her her seat in Massachusetts against me. But you know, Bernie Marino won in Ohio against she Brown and the fair shaped crypto Super Pac was the most successful super PAC in the country that last election year.
And they made a real difference. And I think now you’re seeing. That people are saying, you know what, crypto actually makes a difference. The people want access to this asset class. 55 million Americans have exposure to it. And so I think what we learned is that the crypto vote, whether you are a Democrat or Republican, can make a difference in elections.
And so I think crypto’s gonna have another big say, come the midterms. Absolutely. There’s so much more and we’re seeing a lot more adoption in the crypto space by people because we’re seeing a lot of attention on these lawsuits, for example, or politicians are, you know, using them as an advertising medium in their campaigns.
Whether that’s they’re pro or against, it’s bringing a lot of attention.
Brian Thomas: I appreciate you highlighting that and brother, I appreciate you running against the establishment to let people do what they do best here in America is, is have their freedom, so appreciate that. And John, last question of the day.
If you could briefly share, you’ve expressed strong opposition to a federal reserve issued Central Bank digital currency, or CBDC as we know. You talked about that just a second ago, stating it’s a hill that you’re willing to die on. What are your primary concerns about consumer issued CBCs and what alternatives do you propose?
John Deaton: Great question, and I think that, you know, I know that defi and decentralization is something that’s close to your heart, and that’s what scares career politicians. Someone like Senator Warren, this concept of decentralization, decentralized finance, because they want. To have like five major banks, and those banks can be controlled by her agency, whether it’s the CFPB or the Senate Banking Committee, but CBDC by the Federal Reserve.
It’s programmable money that can be turned on and off. Now, they wouldn’t start that way, but if we take it to sort of the far extreme, it really is. Big Brother in George Orwell’s, 1984 coming to life, you could program the money to only work in a certain region. It can be turned on and off. Oh, wait a minute.
You know Brian, you made a donation to some a, b, C company. We view that the ones in control view that as an extreme organization, now your money doesn’t work. They can control you. If they control your money, they control your entire life. And again, I’m not suggesting that CBDC would start off like that, but that’s the slippery slope you could go down.
And the alternative, I think we’re seeing it, you know, I, uh, I got involved with XRPI was mainly a Bitcoin or, but you know, I saw XRP could be used as a bridge currency and cross-border payments and other tokens as well could be utilized that way. And now we see that stable coin and there’s going to be apparently stable coin legislation is probably.
Fair to say. Financially speaking, the most innovative place we’re at in crypto, we’re gonna get legislation. Brad Garing house, uh, at the Digital Asset Summit this week said that we’re gonna see a 10 x in stablecoin market caps. You know, whether it’s USDC, circo, or Tether or Ripples, stable coin, tier one banks are probably gonna issue stable coins, which will reduce friction in the banking system.
You know, self custody of your money, self custody of your Bitcoin or your crypto. To me, that’s freedom. And as someone who grew up in poverty, I see the American dream escaping. You know, people used to say, well, the American dream was owning your own house, and well, houses aren’t unaffordable. For regular people.
So I look as Bitcoin and crypto as sort of the new American dream and fighting the government from controlling that type of, or limiting people’s access to it is something I would die on for sure.
Brian Thomas: Thank you. Like you said, it may not be the idea behind CBDC is maybe not to limit people that maybe they don’t agree with, but that is a slippery slope and there’s obviously, this became a contentious topic over the last couple years here.
We saw Fed now go live and we know that might be the foundation for starting the CBDC, but I appreciate your insights on that for sure. I think there’s a lot more that we need to educate. The American people on this stuff. ’cause there’s a lot of things that happen in DC that we’re just not privy to because I think it’s purposely hidden.
But that’s just my stance. But I appreciate your insights on it. I know you’re doing the right thing for the American people overall, no matter where you vote on the aisle. So I appreciate that. And John, thank you. It’s been such a pleasure chatting with you today and I hope to see you real soon.
John Deaton: It’s been my honor.
Thank you, Brian.
Brian Thomas: Bye for now.
John Deaton Podcast Transcript. Listen to the audio on the guest’s Podcast Page.
