- U.S. Senator Cynthia Lummis and a group of professors have submitted amicus briefs to a federal court.
- She is supporting Coinbase against the SEC’s attempt to regulate cryptocurrencies.
- The outcome of this legal battle could greatly impact the rules and regulations that apply to cryptocurrencies in the United States.
U.S. Senator Cynthia Lummis (R-Wy.), several crypto lobbying organizations, and a group of professors have submitted amicus briefs to a federal court. She is urging the dismissal of a Securities and Exchange Commission (SEC) lawsuit against the prominent cryptocurrency exchange Coinbase. The move has escalated the ongoing legal battle between the SEC and Coinbase over allegations that the exchange operated as an unregistered securities exchange.
Challenging the SEC’s Authority
The amicus briefs, filed in the U.S. District Court for the Southern District of New York and directed to Judge Katherine Polk Failla, echo the arguments made by Coinbase in its motion to dismiss the case. The collective assertion by these organizations and lawmakers is that the SEC is overstepping its authority after having asked Coinbase to halt trading in all cryptocurrencies except Bitcoin before initiating legal proceedings against the company.
Among the groups supporting Coinbase are well-known organizations like the Blockchain Association, Crypto Council for Innovation, Chamber of Digital Commerce, DeFi Education Fund, Chamber of Progress, and Consumer Technology Association, along with venture firms including Andreessen Horowitz and Paradigm. Furthermore, a group of academics, including professors, have also joined the cause.
Coinbase’s Legal Defense
Coinbase’s main argument reiterated in the amicus briefs, is that the transactions highlighted by the SEC do not fulfil the criteria of an investment contract, thus not constituting a violation of securities law. This core contention forms the basis of Coinbase’s defence against the SEC’s allegations.
The timing of these amicus briefs is significant. The briefs emerged just after the SEC reached a settlement on similar charges with another global exchange, Bittrex, which is currently undergoing bankruptcy proceedings for its U.S. arm. These developments underscore the evolving regulatory landscape for cryptocurrency exchanges in the United States.
Separation of Powers and Legal Precedent
The amicus brief submitted on behalf of Senator Lummis highlights the broader implications of the SEC’s actions. It argues that the SEC is seeking to exert significant influence over economic, political, and legal matters that are actively under consideration by Congress and various agencies. The brief also points out that the SEC’s expansive interpretation of its own authority contradicts fundamental separation-of-powers principles.
The briefs often reference the recent Supreme Court case of West Virginia vs. the Environmental Protection Agency, where it was established that regulatory agencies require Congressional approval to exceed their designated mandates.
Differing Judicial Views and Legislative Outlook
However, it’s important to note that the argument presented in the amicus briefs has faced counterarguments from different federal judges. In a separate SEC case against a crypto platform, Judge Jed Rakoff rejected a similar motion to dismiss, arguing that the cryptocurrency industry has not yet reached a level of significance that necessitates adherence to those Supreme Court precedents.
Regarding the legislative perspective, while certain committees within the House of Representatives have advanced bills addressing crypto market structure and stablecoin issues, there’s uncertainty surrounding the passage of these bills through an evenly divided Senate.
The Move Ahead
Different judges have different opinions on this matter. Some agree with the supporters of Coinbase, while others don’t. And while some lawmakers are trying to pass new laws to regulate cryptocurrencies better, it’s still uncertain what those laws will be and when they’ll be passed.
Ultimately, this situation is a big deal because it’s not just about one exchange or case. It’s about how the government decides to handle cryptocurrencies in the future. The outcome of this legal battle could greatly impact the rules and regulations that apply to cryptocurrencies in the United States.