The United States Securities and Exchange Commission (SEC) has again been accused of exceeding its authority and unfairly labeling crypto assets as securities, this time in its insider trading case against former cryptocurrency employees. Coinbase.
In an amicus curia brief filed on February 22, the US-based Chamber of Digital Commerce. argument the case should be dismissed as it represented an expansion 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 an enforcement action against third parties who had nothing to do with the creation, distribution, or trading of those assets. This is not a healthy policy making process. Dismiss! https://t.co/06WAJ65Ckl
—Perianne (@PerianneDC) February 22, 2023
“This case represents a stealthy but dramatic and unprecedented effort to expand the jurisdictional reach of the SEC and threatens the health of the US digital asset market,” wrote Perianne Boring, founder and CEO of the Digital Chamber of Commerce.
The Chamber noted that the "SEC's intrusion into the digital asset market" was never authorized by Congress, noting that other Supreme Court cases have ruled that regulators must first receive authorization from Congress.
“By acting without authorization from Congress, [the SEC] continues to contribute to a chaotic regulatory environment, hurting the very investors it is meant to protect,” he wrote on Twitter.
The Chamber also argued that by filing securities fraud lawsuits, the SEC was essentially asking the court to confirm that the secondary market trades in the nine digital assets mentioned in a insider trading case against a former Coinbase employee constitute securities transactions, which he suggested was "problematic."
This novel attempt at @SECGov Imposing securities regulations through the "back door" of an insider trading action raises serious due process concerns and will lead to a range of consequences that will harm investors and threaten digital assets. Therefore, it must be discarded!
— Digital Chamber of Commerce (@DigitalChamber) February 22, 2023
“We have serious concerns about [the SEC’s] attempting to label these tokens as securities in the context of an enforcement action against third parties who had nothing to do with the creation, distribution or trade of those assets,” added Perianne.
The Chamber cited the case LBRY v SEC in its brief, in which the judge had ruled that transactions in the secondary market not be designated as securities proceedings.
The judge had been persuaded by a paper by commercial contracts lawyer Lewis Cohen, which noted that no court had recognized the underlying asset as a security at any time since the landmark SEC v WJ Howey Co. ruling, a precedent-setting case. . to determine if a securities transaction exists.
The latest amicus brief follows a similar filing by advocacy group Blockchain Association on February 13, which 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 asset space."
Related: Gary Gensler's SEC is playing a game, but not the one you think
An amicus curiae may be filed by an amicus curiae, or "friend of the court," which is a person or organization that is not involved in a case but can assist the court by offering relevant information or viewpoints.
The SEC sued former Coinbase Global product manager Ishan Wahi, brother Nikhil Wahi, and associate Sameer Ramani in July 2022, alleging that the trio had used confidential information Earned by Ishan to make $1.5 million in profit by trading 25 different cryptocurrencies.
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