The Securities and Exchange Commission (SEC) case against cryptocurrency exchange Coinbase was requested to be dismissed by a federal court on Friday by U.S. Senator Cynthia Lummis (R-Wyo. ), a number of crypto advocacy groups, and a group of academics.
The organisations and lawmakers claimed in amicus briefs, or friend of the court briefs, that the SEC was trying to go beyond its legal authority by filing a lawsuit alleging that cryptocurrency trading platforms like Coinbase are also unregistered securities exchanges, brokers, and clearinghouses trading similarly unregistered securities in the form of crypto assets. In June of this year, the SEC filed litigation against Coinbase and sister exchange Binance (as well as Binance.US, the latter’s U.S. subsidiary).
The amicus filings, which are directed to Judge Katherine Polk Failla of the United States District Court for the Southern District of New York, rehash Coinbase’s own justifications for its move to dismiss the lawsuit.Without counting the senator’s brief, six briefs were submitted by lobbying groups like the Blockchain Association, Crypto Council for Innovation, Chamber of Digital Commerce, DeFi Education Fund, Chamber of Progress, Consumer Technology Association, venture capital firms like Andreessen Horowitz and Paradigm, and half a dozen academics.
In a request for judgement filed earlier this month, Coinbase contended that the SEC-identified transactions did not qualify as investment contracts and, as a result, did not violate the securities laws.The SEC reached a similar settlement with Bittrex, a different international exchange with a U.S. branch, a day before to the amicus briefs. The U.S. division is going through bankruptcy.
This is not your standard enforcement case. The brief submitted on behalf of Lummis stated that the SEC aims to have significant influence through this action over economic, political, and legal issues that Congress and numerous agencies are actively considering. The purpose of Amicus’ submission of this brief is to draw attention to two things: (i) the crucial issues at stake in this case, which Congress should be considering right away; and (ii) the fundamental principles of the separation of powers, which strongly favour deferring to Congress over adopting the SEC’s novel and expansive view of its own authority.The majority of the arguments cited the most recent Supreme Court decision West Virginia v. the Environment Protection Agency, which determined that regulatory agencies may not broadly exceed their jurisdiction without Congressional approval.
Another federal judge in the same court who was recently presiding over a second SEC case against a cryptocurrency platform rejected the claim. Judge Jed Rakoff denied Terraform Labs’ move to dismiss, writing that the crypto business isn’t currently significant enough to be in line with those Supreme Court precedents.
It’s also uncertain whether Congress would move swiftly to enact comprehensive cryptocurrency regulation. Legislation to address market structure and stablecoin issues was recently advanced by the House Financial Services and Agriculture Committees, but the full House has not yet taken them up. Although it appears likely that the House will adopt the bills, it is unclear whether the equally divided Senate will approve them.
The Commodity Futures Trading Commission (CFTC), the SEC’s sister regulator, may take over in certain situations, according to a number of bills that lawmakers have recently introduced, including Lummis and Senator Kirsten Gillibrand (D-N.Y.). This is stated in Lummis’s brief.”Each of these legislation acknowledges that the cryptocurrency business transcends the SEC’s present legislative authority and does not totally comply with existing securities laws. The variety of interests involved necessitate a global perspective that goes beyond what can be provided by a single organisation. These crucial factors are taken into account by Congress, according to the brief.