Rodrigo Seira, the special counsel for crypto investment firm Paradigm, has strongly criticized the U.S. Securities and Exchange Commission (SEC) for allegedly pursuing crypto exchange Bittrex in an unjust manner, aiming to regulate secondary crypto markets. Seira shared his thoughts in a Twitter thread, following Paradigm’s amicus brief filing arguing for the dismissal of the SEC’s case against Bittrex, claiming that the regulator is misusing the Howey test to support its claims.
Paradigm filed the amicus brief on July 7, asserting that the SEC exceeded its jurisdiction. Seira emphasized in his thread that SEC Chair Gary Gensler acknowledged the lack of a proper regulatory framework for crypto exchanges, implying that the regulator lacks the authority to regulate these secondary markets.
Seira reiterated similar arguments in a blog post on July 7, stating that the SEC lacks authority over crypto assets since they do not involve “investment contracts” and therefore do not fall under the agency’s purview. He pointed out that without the rulemaking requested by Coinbase, the digital asset industry remains uncertain, being asked to register without effective means to do so.
The SEC initially filed a complaint against Bittrex on April 17. Subsequently, on April 30, the exchange surrendered its Florida money transmitter license and ultimately filed for bankruptcy on May 8.
Notably, this is the second time Paradigm has come to the defence of a crypto organization facing legal action from the SEC. In May, Paradigm sought to file an amicus brief in support of Coinbase, arguing that the SEC had failed to provide clear rules or guidance for digital asset firms in the United States.
Seira’s critique highlights the ongoing tension between the SEC and crypto exchanges, particularly regarding the scope of the SEC’s regulatory authority over the cryptocurrency industry. The outcome of the case against Bittrex could potentially have significant implications for the regulation of secondary crypto markets in the United States.