Top SEC crypto lawyer leaves to join pro-crypto firm, regulator facing new lawsuit

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A key mem­ber of the US Secu­ri­ties and Exchange Commission’s (SEC) legal team, Ladan Stew­art,  stepped down from her role at the agency to join a pro-cryp­to law firm, Bloomberg Law report­ed on Feb. 21.

Stew­art, who served as Region­al Tri­al Coun­sel in the SEC’s Cryp­to Assets and Cyber Unit since Sep­tem­ber 2022, has joined White & Case as a part­ner to estab­lish a cryp­to and cyber defense practice.

In a state­ment to Bloomberg, she said:

“Cryp­to is here to stay — that’s become very clear with the launch of a slew of Bit­coin exchange-trad­ed funds… Giv­en the com­plex­i­ty and the tur­bu­lent enforce­ment are­na, legal ques­tions sur­round­ing cryp­to are going to be at the fore­front for some time.”

Stew­art joined the SEC in 2015 and was part of the SEC lawyer team in the regulator’s case against Rip­ple, which con­cerned the secu­ri­ties sta­tus of the asso­ci­at­ed XRP token.

Stew­art also led the SEC’s ongo­ing law­suit against Coin­base, and recent legal fil­ings indi­cate that she will with­draw from that case.

Accord­ing to the report, Stewart’s new law firm has rep­re­sent­ed var­i­ous high-pro­file clients, includ­ing Microsoft, Gold­en­Tree Asset Man­age­ment, and the phar­ma­ceu­ti­cal com­pa­ny Abb­vie Inc.

Bloomberg ETF ana­lyst Eric Balchu­nas not­ed else­where that White & Case advised Fideli­ty as it cre­at­ed its spot Bit­coin ETF (FBTC), which gained approval in Jan­u­ary. The law firm was also involved in Cel­sius’ now-com­plete bank­rupt­cy case.

White & Case mem­ber Joel Cohen praised Stew­art and said her expe­ri­ence is “a sig­nif­i­cant asset giv­en the height­ened reg­u­la­to­ry scruti­ny of the cryp­to indus­try in recent years.”

SEC facing a new lawsuit

It is unclear whether this devel­op­ment sup­ports the notion that the SEC’s abil­i­ty to reg­u­late by enforce­ment is weak­en­ing. The news comes months after a Novem­ber 2023 report sug­gest­ing that the SEC strug­gles to hire cryp­to experts, part­ly because of its pro­hi­bi­tion on hold­ing crypto.

Mean­while, the reg­u­la­tor faces a fresh law­suit filed in Texas by cryp­to com­pa­ny Lejilex and the Cryp­to Free­dom Alliance of Texas (CFAT). The law­suit accus­es the SEC of exceed­ing its author­i­ty in reg­u­lat­ing dig­i­tal assets, Reuters report­ed on Feb. 21.

Lejilex aims to launch a cryp­to exchange and dis­putes the SEC’s clas­si­fi­ca­tion of dig­i­tal tokens as secu­ri­ties, a stance that con­flicts with the SEC’s actions against promi­nent exchanges like Coin­base and Binance.

The plain­tiffs chal­lenge the SEC’s inter­pre­ta­tion of dig­i­tal assets as “invest­ment con­tracts” and advo­cate for the appli­ca­tion of the “major ques­tions” doc­trine, which restricts sig­nif­i­cant reg­u­la­to­ry actions with­out explic­it Con­gres­sion­al authorization.

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