Ex‑SEC Official Says SEC Overreaches Authority with New Crypto Rule

John Reed Stark, the former chief of the SEC’s Office of Internet Enforcement, publicly challenged the agency’s latest crypto‑regulatory proposal, calling it illegal and an overstep of congressional authority.

Background on the SEC’s proposal

In August, SEC Chair Paul Atkins announced a package of exemptions called “Regulation Crypto Assets.” The plan is intended to create a safe‑harbor framework that would let issuers self‑certify their tokens as non‑securities, thereby expanding market participation.

Stark’s legal objections

Stark contends that the proposal exceeds the SEC’s exemptive powers under Section 28 of the Securities Act and Section 36 of the Exchange Act. He argues that allowing issuers to define their own instruments contradicts the agency’s longstanding litigation positions and the major questions doctrine, which reserves decisions of such magnitude for Congress.

Connection to the CLARITY Act

The criticism follows the Senate’s failure to invoke cloture on the CLARITY Act, a bill that would have addressed crypto market‑structure issues. Stark cites the stalled legislation as evidence that the matter belongs in the legislative arena, not in agency rulemaking.

Potential legal battle

Stark warned Chair Atkins that the SEC’s rule is likely to face a federal court challenge and urged the agency to prepare for litigation.