Canadian entrepreneur and renowned “Shark Tank” star Kevin O’Leary predicts that the era of crypto cowboys is nearing its end, as the Securities and Exchange Commission (SEC) tightens its legal grip on two prominent firms within the industry.
According to O’Leary, the recent consecutive lawsuits filed by the SEC against cryptocurrency exchanges Binance and Coinbase will mark a significant turning point in the industry. He believes that these legal actions will steer the current perception of the crypto market as a “Wild West” towards more regulated and stable grounds in the future.
“I believe that as an industry, we are poised to move beyond our past and embrace a new future,” expressed O’Leary. He emphasized that despite the immense potential of blockchain technology, it is still trapped in an unregulated and unpredictable environment often associated with rogue cowboys.
O’Leary welcomed the increased regulatory scrutiny faced by the digital assets industry, particularly in the wake of FTX’s downfall. He explained that he is weary of seeing cryptocurrency portrayed negatively in news headlines and discussed with skepticism in political circles.
O’Leary, who served as an investor in FTX and acted as a spokesperson for the exchange, finds himself among the defendants in a class-action lawsuit alongside other celebrities who endorsed Sam Bankman-Fried’s now-defunct crypto empire. Some of the notable figures named in the lawsuit include Tom Brady, Larry David, and Shaquille O’Neal.
Regarding his involvement with FTX, O’Leary clarified that he is an active investor in startups but disagreed with the claims made in the lawsuit. He expressed confidence in his legal representation and stated that he would let the courts decide the matter.
These remarks from O’Leary come in the aftermath of the Securities and Exchange Commission (SEC) filing 13 civil charges against Binance and its CEO, Changpeng Zhao. The SEC alleges that Binance was involved in extensive deception, including commingling customer funds and intentionally violating U.S. securities laws, among other accusations.
Binance, recognized as the largest exchange globally, has strongly criticized the lawsuit, deeming it “unreasonable” and “misguided.” However, O’Leary holds the belief that the Securities and Exchange Commission’s (SEC) enforcement action will have a detrimental impact on Binance’s access to capital, regardless of the company’s perspective or arguments.
According to O’Leary, the truth lies in the fact that a regulated exchange is considerably less profitable compared to an unregulated one operating in a rogue manner—until the SEC files a lawsuit that severely hampers the business. O’Leary highlights that Binance is currently facing this situation, which he describes as being pushed into the “stone age” by the SEC.
O’Leary further emphasized that the SEC’s recommendation to freeze Binance’s assets will add additional strain on the platform. As customers cautiously withdraw their funds, the platform will be impacted. O’Leary also predicts that the lawsuit will hinder Binance’s prospects of expanding into other regulatory jurisdictions.
According to O’Leary, it is possible that one may choose to operate in the shadows and engage solely in rogue markets. However, he warns that over time, this approach will result in a deprivation of necessary resources. O’Leary suggests that such a scenario is unfavorable and should be considered with concern.
O’Leary noted that Coinbase’s legal challenges present a different scenario, explaining that the leading cryptocurrency exchange in the United States faces a difficult but relatively less challenging path compared to Binance.
Coinbase recently faced a series of charges, alleging its failure to register as an exchange, clearing house, and broker with the SEC. The lawsuit also claimed that the staking products offered by Coinbase were unregistered securities, along with numerous tokens being traded on the platform.
In response, Coinbase has taken the SEC to court, challenging its petition for rulemaking, which seeks clearer regulations for the crypto industry. Coinbase argues that the agency’s regulatory approach has stifled the industry’s growth. Coinbase CEO Brian Armstrong further reinforced this message on Twitter, signaling the exchange’s preparedness to defend itself.
Armstrong expressed dissatisfaction with the SEC’s approach, stating that rather than providing a transparent set of regulations, the agency has adopted a strategy of regulation through enforcement, which he believes is detrimental to the United States. Armstrong emphasized that if seeking legal recourse is necessary to attain clarity regarding regulations, Coinbase is prepared to pursue that path.
According to O’Leary, Coinbase’s decision to engage in a legal battle with the SEC is discouraging for institutional investors, as evidenced by the decline in the exchange’s stock price. O’Leary believes that Coinbase’s choice to pursue litigation instead of reaching a settlement with the agency does not instill confidence among shareholders. He highlights the challenging odds of trying to outmatch the SEC, an institution with abundant resources that has brought forth specific allegations. O’Leary adds that this situation is not favorable for investors.
While SEC Chair Gary Gensler has repeatedly encouraged digital asset firms to register with the agency, Coinbase CEO Armstrong stated that there is currently no clear path to regulatory compliance outlined by the watchdog. O’Leary emphasizes that institutional investors still view Coinbase’s legal fight unfavorably.
O’Leary stated that it is understandable how institutional investors have grown weary. He suggested that Coinbase could take further steps to become a regulated entity instead of remaining as a pioneer constantly facing challenges and market capitalization losses.
In O’Leary’s view, many of the leading digital asset firms today will ultimately perish due to a lack of maturity or experience. He believes these firms are not equipped to elevate the industry to a level where institutions would feel confident reinvesting in crypto projects or tokens like Bitcoin.
According to O’Leary, these firms fail to grasp the concept of integrating the global financial system in a manner that facilitates institutional participation. While acknowledging their contributions and entrepreneurial spirit, he concludes that it is time for these firms to exit the stage.