U.S. Senator Cynthia Lummis (R-Wy.), alongside influential crypto lobbying organizations and a consortium of esteemed professors, collectively issued a resounding call to a federal court, urging the dismissal of a contentious Securities and Exchange Commission (SEC) lawsuit against prominent cryptocurrency exchange Coinbase. This unified front, comprising amicus – or “friend of the court” – briefs, resonates with a steadfast belief that the SEC’s lawsuit is an overreach of its jurisdictional boundaries.
The SEC’s lawsuit, targeting crypto trading platforms such as Coinbase, alleges that these platforms are acting as unregistered securities exchanges, brokers, and clearinghouses while engaging in the trading of crypto assets that are perceived as unregistered securities. This lawsuit was extended to Coinbase and Binance, including the latter’s U.S. division, Binance.US, back in June of this year.
Expressing their alignment with Coinbase’s stance, the amicus briefs, thoughtfully presented before Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York, mirror the key contentions encapsulated in Coinbase’s motion for judgment, which seeks the dismissal of the case.
The influential array of backers comprises a formidable coalition, featuring lobby organizations such as the Blockchain Association, Crypto Council for Innovation, Chamber of Digital Commerce, DeFi Education Fund, Chamber of Progress, Consumer Technology Association, as well as notable venture firms including Andreessen Horowitz and Paradigm. Additionally, this coalition boasts the inclusion of a group of accomplished academics, with a grand total of six briefs submitted, not counting Senator Lummis’s own input
Coinbase’s argument in its motion for judgment hinges on the assertion that the transactions highlighted by the SEC do not conform to the definition of an investment contract, and thus, do not breach securities law.
This collective display of support comes on the heels of the SEC’s settlement of analogous charges with Bittrex, a prominent global exchange with a U.S. presence currently embroiled in bankruptcy proceedings.
However, the coalition’s resolve runs deeper than a mere legal dispute; it underscores a profound concern over the extent of the SEC’s jurisdiction and its implications on broader economic and political realms. As articulated by Lummis’s amicus brief, the SEC’s pursuit of primary influence over pivotal economic, political, and legal questions transcends the traditional confines of an enforcement case, positioning it as a potent force impacting not only Congress but also various governmental agencies.
The reference to the recent Supreme Court case, West Virginia vs. the Environmental Protection Agency, is a central thread woven through these briefs. This case firmly asserted that regulatory agencies cannot extend their scope of influence without explicit Congressional approval.
While the argument met favor in some legal quarters, it was recently rejected by another federal judge presiding over a distinct SEC case involving a crypto platform. Judge Jed Rakoff, overseeing the Terraform Labs case, opined that the crypto industry’s significance was not yet substantial enough to align with those Supreme Court precedents.
Furthermore, the timeline for Congress’s decisive action on broad crypto regulation remains uncertain. Though legislative strides have been made within the House Financial Services and Agriculture Committees, with bills addressing market structure and stablecoin issues gaining traction, the passage of these bills in an evenly divided Senate presents an equivocal outcome.
Lummis’s brief astutely highlighted the efforts of lawmakers, including herself and Senator Kirsten Gillibrand (D-N.Y.), in introducing a series of bills that delineate the SEC’s jurisdiction and its coexistence with the Commodity Futures Trading Commission (CFTC). These bills acknowledge the crypto industry’s unique nuances that challenge existing securities laws and transcend the SEC’s statutory purview.
As SEC Chair Gary Gensler, the steward of the regulatory body since 2021, asserted last year, numerous crypto tokens already align with the requisites for securities regulation. This contention merely adds to the ongoing conversation surrounding the boundaries of the SEC’s dominion within the dynamic crypto landscape.