Legal expert James Murphy has labeled the amicus brief submitted by six law scholars in support of Coinbase as “devastating” for the U.S. Securities and Exchange Commission (SEC). In a recent post, Murphy emphasized that the amicus brief effectively dismantled the SEC’s “investment contract” theory, which the Commission has been using to assert its jurisdiction over certain cryptocurrency tokens.
The amicus brief, filed by a group of law professors and scholars who specialize in securities law and related fields, includes experts from prestigious institutions such as UCLA, Boston University, Fordham Law School, University of Chicago, and Yale Law School. This legal document provides additional information and perspective to the court from a non-litigant party that has a strong interest in the case.
Murphy praised the amicus brief’s thorough examination of the historical meaning of the term “investment contract,” particularly before and after the passage of the federal Securities Act in 1933. The scholars’ argument is rooted in case law and provides a detailed explanation, highlighting that the historical interpretation of an investment contract refers to a contractual arrangement granting an investor a share of future income, profits, or assets of the seller.
The scholars emphasized that investment contracts identified by the Supreme Court consistently involve a contractual commitment to provide a lasting stake in the enterprise, a feature that distinguishes them from other arrangements. This key ingredient has remained constant in differentiating investment contracts from other agreements since the inception of the term.
In Murphy’s analysis, the amicus brief delivers a substantial blow to the SEC’s assertion that tokens traded on platforms like Coinbase should be classified as securities. He believes that the arguments laid out in the brief effectively challenge the SEC’s stance that crypto tokens traded on secondary markets inherently qualify as investment contracts.
The amicus brief, combined with arguments from Senator Lummis, who emphasized that the SEC should not overreach its legislative authority, strengthens the growing skepticism within legal circles about the SEC’s approach to cryptocurrency regulation. This development highlights the evolving landscape of legal discussions surrounding digital assets and their classifications, with experts actively engaging in the conversation to ensure a balanced and well-informed approach to regulation