Assuming this report is true, it shouldn't surprise anyone who's seen Chairman Gensler's recent comments on DeFi. It also shouldn't worry anyone too much (yet). An investigation is *not* an allegation of wrongdoing, it's just how SEC gathers information.
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It should be highlighted that when a regulator "gathers information" it means millions of $ of legal costs and millions more in lost productivity incurred on the target.
When no wrongdoing is found, the regulator doesn't reimburse for their transgression, nor even offer apology
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This is an important point. It's unfortunate & misguided for regulators to handle fact-finding this way, under the guise of threats of enforcement actions rather than by engaging in a healthy & collaborative process. It's bad for everyone: the target, the regulator, & the people.
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Further, I think there’s a sunk costs problem with these inquiries. It’s hard to invest a ton of effort in to an investigation and walk away empty handed. Because penalties can be so obscene and judiciary so uneducated, it gives a lot of leverage to force a settlement.
I fully agree.
It also gives leverage for the practice of guidance by enforcement. In addition to fines & other concessions, regulators use settlement orders as a means to pronounce legal conclusions without challenge, & then they treat these orders as "precedent" (they aren't).
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Do you think the outcome of the Ripple case could have some bearing on the SEC's approach?
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