Aug 15, 2023

Sen. Cynthia Lummis (R-Wy.), some crypto lobbying organizations, and a group of professors are calling on a federal court to dismiss a Securities and Exchange Commission (SEC) lawsuit against Coinbase.

Video transcript

The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. All right, Senator Cynthia Leiss, some crypto lobbying organizations and a group of professors are calling on a federal court to dismiss an sec lawsuit against coin base. Joining us now to discuss is the Chamber of Digital Commerce, Vice President of Policy, Cody Carbone. Welcome to the show, Cody. Hey, good morning Jen and Lawrence. Thanks so much for having me. Thanks for being here. All right, let's, let's talk about these Amic briefs that were filed last week. It echoes Coin Base's own arguments and the motion is to dismiss the case. What case, talk to us about what's going on here? Why do you feel it's necessary to do this? Uh And where do we go next? Yeah, absolutely. The sec as we all know has been on a tirade against the digital asset industry. And so cases like this when they're going after a really good actor like coin base gives the industry an opportunity to kind of voice their opinions and fight back. We believe that the SEC is acting unconstitutionally um against the separation of powers and the major questions doctrine. I'm sure we've heard a lot about um as well as due process, the SEC has been filing these enforcement actions against the industry without any rhyme or reason and in favor of doing them instead of rule making. And so as we have seen in Congress and we are discussing and debating all of these different legislative proposals that would change the jurisdictional lines of who gets to regulate the digital asset industry. The question is up in the air, should it be the SEC? Should it be the CFTC? And the SEC is trying to regulate the entire industry and we thought it was necessary to fight back and claim that that was improper. So, so Cody, of course, II, I mean, in, with regards to the SEC trying to uh regulate the industry, they're, they're seeing a, a vacuum, they're trying to like all agencies, they try to fill that power vacuum that said uh one of the other cases the SEC has brought up uh has, is also against bin, you have not filed an Amic brief with that, correct? Why not? We haven't done at this time? It doesn't mean we're not going to um and we're not looking into it. We have been very consistent in filing briefs in the wahi matter in the ripple case and in coin base here that we will continue to call out the S ECs um outside authority or they're un ungiven authority of just trying to regulate this whole industry in one fell swoop. So it doesn't mean we won't, um, we don't believe they have the delegated authority from Congress right now to regulate the whole industry. And so we'll continue calling that out until Congress kind of resolves the issue is the issue with Binance more severe than just, uh, what they were trading, but how they were managing their money. I mean, do you want to really get into that into that quagmire? I don't think we would comment on that. There's, there's different reputational issues, of course, when it comes to Binance first coin base or other, you know, um, players in this space, but we will always continue to call out the SEC just labeling every token as security when we don't think they have that authority. And that would likely, if we were going to go forward in the Binance matter, that would likely be our argument. Have you had any kind of productive discussions with any of the regulators? Yes. Actually, we've talked to the SEC. We've talked to the CFTC. I think it's the beauty of the chamber and being the voice for the entire industry. There is still an open door to go in there and talk. There are still people at the staff level willing to engage. However, I don't believe, you know, when we file briefs like this, we're not getting the rosiest reception from the chair. Uh, the chair has a vendetta against this industry. I don't think, you know, instances like this change that or help repair the relationship. However, we still have been able to go and talk to staff. So we have had those constructive conversations. So after you went into the sec, they didn't charge you with securities dealing. No, thankfully fingers crossed seems to be, seems to be a thing that happens there. Uh All the briefs that we mentioned in the introduction site, a recent Supreme court case, West Virginia versus the Environment Protection Agency case. Talk to us about the relevance here. Why are we referencing that? Yeah, this is the major questions Doctrine and what it says that issues of economic and political significance have to, if agencies are going to regulate those type of issues, they have to have very clear statutory authority from Congress as we have seen is evident by the debate in Congress right now and the jurisdictional lines we talked about earlier on who gets to regulate digital assets. The SEC has not been given that clear authority. And so it is still a major question as a crypto industry. This is a trillion dollar industry. And so the sec taking that unilateral authority just saying everything's security. We believe that violates that major questions doctrine and it's up to Congress to fill that vacuum eee except from the Se C's perspective. They're not just a uh you know, and as I said before, they were filling a vacuum they're filling that vacuum because they, the chair views and, and he's not somebody who doesn't understand crypto. I mean, this is the last guy I would say, Gary doesn't know a thing about crypto. He actually does. Uh, you might not agree with what he, he believes, but nonetheless, that's the way he views it is that everything except for Bitcoin, possibly ether. We don't know his views entirely on ether yet. But I would venture to say he pretty much thinks that's a security as well. But his view is these are securities. Therefore, I have the right. I, we have the obligation, rather the sec has the obligation to, to, um, to, to regulate it. Therefore, the real issue seems to be not so much the SEC going in for a power grab, although that's the way it seems and that's the way I'm pretty sure people through the CF DC might see it. But it could also be that, hey, the real problem is that the legislators aren't saying it's not a security and if he looks at it and he says, gee this, this checks off those four boxes and how we test this is security shouldn't, you know, how come, how come the crypto industry isn't, I don't wanna say forceful enough, but, you know, um, a lot of people, a lot of defense lobbyists get things done. How come you guys haven't been getting things done here? Right. You know, getting this, getting it defined already after how many years in existence, Man, Lawrence, we're trying our hardest. Um I think there's an educational gap that we always talk about with this industry. And so we're finally at a point where we're getting lawmakers up to speed. So it was time to take a nice little victory lap before Congress broke for August recess because it was the first time that we saw legislative initiatives that would define those jurisdictional lines move through Congress. We still have a lot of work to go. Congress not acting and not filling that void is a huge component of this. However, the sec acting unilaterally and just throwing out enforcement actions saying everything is a digital asset security and everything is an investment contract when we've had. Now cases like the ripple case say that's not necessarily true and doing this in favor of trying to promote rules and actually do their job and go through the Administrative Procedure Act and do the rule making and give notice and comment. That's what we're arguing against here. So Congress definitely a component but the SEC is also acting out of bounds here. All right. And lastly what needs to happen next? You know, you mentioned that Congress needs to act, you mentioned the ripple case, but the SEC is appealing, appealing that what what do you think is realistically going to happen next to give us a step forward? Well, I'm hoping in this case in the coin based matter that the matter is dismissed and that will be another win for the industry and hopefully that will provide more motivation for Congress to act. That's going to be the real resolution here. Congress has to fill that void until Congress filled that void or until there's administration change, which is not till 2024. We're going to continue to have to fight against the industry uh sorry against the SEC. There's going to continue to be these enforcement actions. The SEC is emboldened. Gary. Gary gentler has a vendetta against the industry. He has made that very clear. Um If you, if people thought that ripple was going to make him back down, I think the appeal was, we could have predicted that I don't think that's going to happen. He then had the terraform labs case which he is now um banking on and so Gary G is not going to stop Congress really has to fill that void. And so I'm hoping that the coin based matter once that's resolved, that will provide another motivator for Congress to act. All right, Cody, thanks so much for joining the show this morning. Thanks so much for having me. That was the Chamber of Digital Commerce, Vice President of Policy, Cody Carbone.

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