Crypto insiders are tying themselves to Coinbase (COIN) as the company seeks to blow up the U.S. Securities and Exchange Commission’s (SEC) “come in and register” crusade aimed at the digital assets sector.
In a series of “amicus” briefs filed this week, several crypto groups are joining the U.S.-based exchange as they collectively insist the SEC is deliberately wrecking the young industry with an insistence that there’s nothing distinct or special about crypto that warrants different treatment under securities laws. The U.S. Court of Appeals for the Third Circuit granted the various groups' petition to join the case on Thursday.
“The digital-assets industry is stuck in limbo, simultaneously told to ‘come in and register’ yet having no effective means of doing so,” said a brief from Paradigm, a firm that invests in digital assets businesses. “It is no surprise that the SEC’s actions have crippled a nascent industry and sown confusion among countless firms unable to conform to the SEC’s view of the law or challenge that view in court.”
The filings – a means by which outside parties can offer support for legal arguments – are piling support on Coinbase’s request more than two weeks ago to force the SEC to respond to an earlier 2022 petition that the agency provide rules clarifying crypto’s place in securities regulation. While SEC Chair Gary Gensler has made it clear that the agency has no intention of tailoring specific rules for crypto, the regulator has to respond by May 13 in the legal dispute.
Meanwhile, even the U.S. Chamber of Commerce – the broadest of organizations that lobby on behalf of U.S. business interests – has offered criticism for the behavior of the SEC.
“Nobody knows for certain which digital assets, if any, are ‘securities’ under federal law,” the Chamber argued in its brief. “That is no small question. It has immense implications for every person involved in the $1 trillion digital-asset economy, and it is the threshold regulatory question from which all others flow.”
The Crypto Council for Innovation – an industry advocacy group – also contends “the SEC’s aggressive stance towards those seeking to comply impairs investors’ ability to differentiate the good organizations from the bad as they are all painted with the same brush by the SEC.”
The legal fight between the SEC and Coinbase – one of many the regulator is waging in the crypto space – may soon be amplified. The agency has warned Coinbase it’s going to be targeted with an enforcement action for violating securities laws.
SEC Chair Gensler continues to repeat his invitation to crypto trading platforms and token efforts to come into the agency and properly register. He released another video last month that cautioned investors about crypto, accusing much of the industry of openly flouting securities laws.
The ramping up of SEC lawsuits and court actions make it increasingly likely that judicial rulings will steer the course of crypto oversight in the U.S.
UPDATE (May 11, 2023, 17:54 UTC): Adds federal court decision to accept the briefs.
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