The US Securities and Exchange Commission has once again been accused of overstepping its authority and unfairly labeling crypto assets as securities, this time in its insider trading case against former Coinbase employees.
In a Feb. 22 amicus brief, the U.S.-based Chamber of Digital Commerce he argued the case should be dismissed because it represented an extension of the SEC’s “regulation by enforcement” campaign and seeks to characterize secondary market transactions as securities transactions.
We have serious concerns about the SEC’s attempt to label these tokens as securities in the context of enforcement actions against third parties that had nothing to do with the creation, distribution or marketing of these assets. This is not a healthy policy making process. Reject! https://t.co/06WAJ65Ckl
— Perianne (@PerianneDC) February 22, 2023
“This case represents a subtle but dramatic and unprecedented effort to expand the SEC’s jurisdiction and threatens the health of the U.S. digital asset market,” wrote Perianne Boring, founder and CEO of the Chamber of Digital Commerce.
The chamber emphasized that the “SEC’s interference in the digital asset market” has never been authorized by Congress, and other Supreme Court cases have held that regulators must first be empowered by Congress.
“By acting without the authorization of Congress [the SEC] continues to contribute to a chaotic regulatory environment and harms the very investors it is supposed to protect,” she wrote on Twitter.
The chamber also argued that when the SEC filed securities fraud complaints, it was essentially asking a court to certify that the secondary market traded the nine digital assets listed in insider trading case against former Coinbase employee they represent securities transactions that she said were “problematic.”
This novel attempt by @SECGov imposing securities regulation through a “backdoor” on insider trading raises serious due process concerns and will lead to a number of consequences that harm investors and endanger digital assets. Therefore, it should be rejected!
— Digital Chamber of Commerce (@DigitalChamber) February 22, 2023
“We have serious concerns [the SEC’s] to attempt to label these tokens as securities in the context of enforcement actions against third parties that had nothing to do with the creation, distribution or marketing of these assets,” Perianne added.
In its opinion, the chamber cited the case of LBRY v. SEC, in which the judge ruled that a transaction in the secondary market would may not be designated as securities transaction.
The judge was persuaded by a document from commercial contract lawyer Lewis Cohen, which pointed out that no court had ever recognized that an underlying asset was a security since the landmark SEC v. WJ Howey Co. ruling. – a case that set a precedent. to determine if a security transaction exists.
The latest amicus brief follows a similar filing from advocacy group Blockchain Association on February 13, which also argued that The SEC has overstepped its authority in that case, arguing that it was “the latest salvo in the SEC’s apparent ongoing strategy of regulation through enforcement in the digital asset space.”
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An amicus brief is filed by an amicus curiae, or “friend of the court,” which is an individual or organization that is not involved in the case but can assist the court by offering relevant information or insight.
In July, the SEC sued former Coinbase Global product manager Ishan Wahi, brother Nikhil Wahi and associate Sameer Ramani, alleging the trio used confidential information got Ishan to earn $1.5 million from trading 25 different cryptocurrencies.