The Chamber of Digital Commerce has accused the U.S. Securities and Exchange Commission (SEC) of attempting to impose securities regulations through the "back door" of an insider trading lawsuit.
This accusation has raised eyebrows in the financial industry, as it could potentially have far-reaching implications for the digital asset sector. If the SEC is successful in its endeavour, it could set a precedent for the regulation of digital assets, potentially leading to a new era of oversight and compliance.
The United States Securities and Exchange Commission (SEC) has once again been accused of overreaching its authority and unjustly labelling crypto assets as securities, this time in its insider trading case against former Coinbase employees.
On February 22nd, the U.S.-based Chamber of Digital Commerce submitted an amicus brief, arguing that the case should be dismissed as it is an extension of the SEC's "regulation by enforcement" campaign and seeks to classify secondary market transactions as securities transactions.
The Chamber of Digital Commerce has highlighted the SEC's "stealthy yet dramatic and unprecedented effort" to expand its jurisdictional reach into the digital assets market, an effort that has not been authorized by Congress. In fact, the Supreme Court has ruled that regulators must first be granted authority by Congress.
The Chamber argued that the SEC's claims of securities fraud in an insider trading case against a former Coinbase employee are "problematic," as they would essentially require the court to uphold that secondary market trades in the nine digital assets constitute securities transactions.
This case, if successful, could have far-reaching implications for the U.S. marketplace for digital assets, potentially threatening its health and stability. By acting without Congressional authorization, the SEC is contributing to a chaotic regulatory environment that harms the very investors it is charged to protect.
Perianne Boring, founder and president of the Chamber of Digital Commerce, expressed serious concerns about the Securities and Exchange Commission's (SEC) attempt to label certain tokens as securities in the context of an enforcement action against third parties who had no involvement in the creation, distribution, or marketing of those assets.
The Chamber cited the LBRY v SEC case in its brief, in which the judge had ruled that secondary market transactions would not be designated as securities transactions. The judge had been persuaded by a paper from commercial contract attorney Lewis Cohen, which highlighted that no court had ever acknowledged the underlying asset was security at any point since the landmark SEC v W. J. Howey Co. ruling - a case that set the precedent for determining whether a security transaction exists.
The Chamber of Digital Commerce's latest amicus brief follows a similar filing from the advocacy group the Blockchain Association on February 13th, which also argued that the SEC had exceeded its authority in the case and claimed it was “the latest salvo in the SEC’s apparent ongoing strategy of regulation by enforcement in the digital assets space.”
Perianne Boring emphasized that the SEC's actions could have far-reaching implications for the industry and that the Chamber of Digital Commerce was committed to ensuring that the industry is regulated in a fair and equitable manner.
An amicus brief is filed by amicus curiae, or “friend of the court,” which is an individual or organization not directly involved in a case, but can provide the court with pertinent information or insight.
In July, the Securities and Exchange Commission (SEC) took legal action against former Coinbase Global product manager Ishan Wahi, his brother Nikhil Wahi, and associate Sameer Ramani, alleging that the three had used confidential information obtained by Ishan to make a staggering $1.5 million in profits from trading 25 different cryptocurrencies.
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