Key takeaways:
- The US SEC has come under fire from Paradigm for avoiding the traditional rulemaking processes in its current legal case against Binance.
- The SEC is attempting to change the law without following the established rulemaking process, according to a statement made by Paradigm.
The United States Securities and Exchange Commission (SEC) has come under fire from venture capital company Paradigm for avoiding the traditional rulemaking processes in its current legal case against the cryptocurrency exchange Binance.
The SEC is attempting to change the law without following the established rulemaking process, according to a statement made by Paradigm on Friday, September 29. Paradigm asserted that it vehemently disagrees with this strategy and that it feels the SEC is going beyond the scope of its regulatory authority.
The SEC filed a lawsuit against Binance in June, alleging several violations of the securities laws, including operating without the required broker-dealer, exchange, or clearing agency license.
The SEC has recently been pursuing litigation against different cryptocurrency exchanges, and
Paradigm emphasized this while also expressing concern that the SEC’s attitude may fundamentally “reshape our comprehension of securities law” in several crucial ways.
Paradigm also emphasized its issues with the SEC’s use of the Howey test and its flaws. In order to decide whether transactions satisfy the requirements for investment contracts and are subject to securities laws, the SEC frequently applies the Howey test, which was established in a 1946 decision concerning citrus groves before the U.S. Supreme Court.
According to Paradigm’s amicus brief, many assets are actively sold, bought, and traded based on their potential for profit.
The SEC has nevertheless regularly spared them from being categorized as securities. The brief further cited examples, including gold, silver, and fine art, to emphasize that the mere possibility of value growth does not automatically qualify a sale as a security transaction.
Recently joining the current legal battle between Binance and the SEC is USD Coin issuer Circle. In Circle’s opinion, stablecoins shouldn’t be classified as securities by the SEC.
Circle contends that these assets shouldn’t be classified as securities because those who buy stablecoins aren’t doing so to make money.
