A crypto trade group accuses SEC of exceeding its jurisdiction via the “back door”
- In the Insider Trading Case, the SEC is suspected of manipulative overreach.
- According to the US securities commission, a former Coinbase product manager was charged with insider trading on July 21, 2022.
- The lawsuit incorrectly classified a number of crypto assets as securities, according to the cryptocurrency trade association Chamber of Digital Commerce.
The U.S. Securities and Exchange Commission filed a lawsuit against former Coinbase workers accusing them of insider trading. According to the cryptocurrency industry group Chamber of Digital Commerce, the lawsuit incorrectly classified a number of crypto assets as securities.
The Chamber of Digital Commerce argued that the SEC does not currently have the jurisdiction to pursue the classification of digital assets as securities, especially in the context of an insider trading case like this one, in an amicus brief submitted.
According to Perianne Boring, creator and CEO of the Chamber of Digital Commerce, this case represents a covert, dramatic, and unprecedented attempt to broaden the SEC’s purview and jeopardises the stability of the American market for digital assets.
The case should be dropped, according to the American Chamber of Digital Commerce, because it would advance the Commission’s “regulation by enforcement” strategy and try to classify secondary market transactions as securities transactions. The brief was submitted on February 22.
In its amicus brief, the group expressed concern that, should the court decide in the SEC’s favour, crypto exchanges that provide the nine tokens that the SEC has deemed securities may be susceptible to state and federal regulatory actions as well as “private lawsuits.” Additionally, it has an impact on investors’ and those tokens’ values.
The Chamber emphasised that the entry into the market for digital assets had never been approved by Congress and cited previous Supreme Court rulings that held that regulators must first obtain congressional permission.
With its fraud allegations, the SEC is primarily requesting that the court enforce that secondary market trade constitutes securities transactions, the court said, despite citing a prior Supreme Court decision in the LBRY v. SEC case that secondary market transactions do not meet the criteria as securities transactions.
The judge was persuaded by a paper from business contract lawyer Lewis Cohen, who noted that no court had ever recognised the underlying asset as a security since the famous SEC v. W. J. Howey Co. decision established the standard for determining whether a security transaction exists.
The cryptocurrency sector has previously criticised the SEC for filing enforcement actions against businesses that deal in digital assets, contending that the regulator should create formal rules specifically for cryptocurrencies. The SEC has insisted that since many crypto tokens satisfy security requirements, existing securities laws also extend to digital assets.