US Senator Lummis and Crypto Lobbyists Are Asking the Court to Dismiss the SEC’s Coinbase Lawsuit
In their amicus briefs — or friends of the court — the organizations and lawmakers alleged that the SEC attempted to exceed its powers by filing a lawsuit alleging crypto trading platforms like Coinbase were concurrent unregistered securities exchanges, brokers and clearinghouses that trade similar unregistered securities in the form of crypto assets. The SEC filed lawsuits against Coinbase and fellow exchange Binance (and its US arm, Binance.US) in June this year.
The amicus briefs, addressed to Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York, mirror Coinbase’s own arguments in its motion to dismiss the case.
Overall, lobbying organizations like the Blockchain Association, the Crypto Council for Innovation, the Chamber of Digital Commerce, the DeFi Education Fund, the Chamber of Progress, the Consumer Technology Association, venture firms like Andreessen Horowitz and Paradigm, and half a dozen academics submitted of six pleadings, excluding that of the senator.
Earlier this month, Coinbase argued in its ruling motion that the transactions cited by the SEC did not meet the definition of an investment contract and therefore did not violate securities laws.
The Amicus briefings come a day after the SEC settled similar allegations with Bittrex, another US-armed global exchange. The US arm is in bankruptcy proceedings.
Almost all briefs cited the recent Supreme Court case West Virginia v. Environment Protection Agency, which held that regulators could not go far beyond their mandate without congressional approval.
The argument was recently dismissed by another federal judge in the same court overseeing another SEC case against a crypto platform. Judge Jed Rakoff denied a motion to dismiss Terraform Labs, writing that the crypto industry was not yet of sufficient importance to live up to these Supreme Court precedents.
It is also unclear if Congress will take swift action on comprehensive crypto regulation. While the Financial Services and Agriculture Committees of the House of Representatives recently introduced legislation that would address market structure and stablecoin issues, the House of Representatives has yet to act on the bills. It is likely that the House of Representatives will push the bills ahead, but passage of the bills by an evenly divided Senate is uncertain.
Lummis’ brief noted that lawmakers — including herself and Sen. Kirsten Gillibrand (DN.Y.) — have introduced a number of bills in recent years that spell out specifically where the SEC’s jurisdiction lies and where its sister regulator, the Commodity Futures Trading Commission (CFTC), can take over.
“Each of these bills recognizes that the crypto industry does not fully fit within existing securities laws and goes beyond the current statutory powers of the SEC.” The multitude of interests at stake requires a holistic approach that goes beyond the scope of a single one Agency goes beyond and also includes approaches around the world. Congress is poised for these important considerations,” the letter said.
SEC Chairman Gary Gensler, who has headed the regulator since 2021, told AskFX last year that he believes many crypto tokens already meet securities regulation standards.
“It’s about that shared enterprise and entrepreneurial effort that’s the hallmark of investment contracts, which are securities.” So I think here we are, that most tokens conform to traditional standards that our Supreme Court has determined and that we, the SEC, have a role to help protect investors and create and enhance confidence in these markets,” he said. “They not only resemble stocks, they are stocks.”
