In a significant development, six esteemed law professors and scholars have come forward to support cryptocurrency exchange, Coinbase in its ongoing legal battle against the U.S. Securities and Exchange Commission (SEC). This move underscores the importance of the case and its potential implications for the broader crypto industry.
The Amicus Brief: A Collective Voice of Expertise
An amicus brief, often submitted by non-litigants with a strong interest in the case, provides the court with additional perspectives and insights. In this instance, the brief was meticulously crafted after thoroughly examining securities laws. Its primary aim is to enlighten the court about these laws’ historical context and evolution.
The scholars behind this brief are no strangers to the world of securities law. They include:
- Stephen M. Bainbridge from UCLA
- Tamar Frankel from Boston University
- Sean J. Griffith from Fordham Law School
- Lawrence Hamermesh from Widener University
- M. Todd Henderson from the University of Chicago Law School
- Jonathan R. Macey from Yale Law School
Their collective expertise has enabled them to present a comprehensive history of the definition of investment contracts, a central issue in the lawsuit.
This move by the professors follows closely on the heels of Senator Cynthia Lummis, who also submitted an amicus brief supporting Coinbase. The increasing number of amicus briefs in favor of Coinbase highlights the significance of the case and the broader implications it might have on the cryptocurrency industry.
The Howey Test: Defining Investment Contracts
The Howey test, a cornerstone in securities law, has been a pivotal point of contention in the case. In their filing, the professors emphasized the importance of this test in determining what constitutes an “investment contract.”
According to the Howey test, for something to be deemed an investment contract, there must be an expectation of profits from the investment, which will be derived from the efforts of others. In simpler terms, an investor should anticipate returns based on the endeavors of the enterprise they’ve invested in.
The professors argued that federal cases, through the Howey test, have consistently recognized that “investment contracts” necessitate an expectation in the business’s income, profits, or assets. They stated, “An investor must be promised, by his or her investment, an ongoing contractual interest in the enterprise’s income, profits, or assets. In this section, we discuss some of these cases.” Their argument underscores the need for the Court to remain consistent with the established definition of ‘investment contract’ when interpreting it in this case.
Independence and Objectivity: No University Affiliations
To ensure transparency and avoid potential conflicts of interest, the law professors made it clear that their respective universities or law schools have no association with the amicus brief. This declaration emphasizes their commitment to the case and ensures that their arguments are seen objectively, free from institutional bias.
By distancing their academic affiliations from the brief, the professors have reinforced the credibility of their arguments, ensuring that the court perceives their insights as unbiased and rooted in their expertise.
The Coinbase vs. SEC lawsuit has garnered significant attention from various quarters, reflecting its potential to shape the future of cryptocurrency regulations. The amicus brief filed by the six law professors adds another layer of depth to the case, providing the court with invaluable insights from some of the brightest minds in securities law. As the case unfolds, the crypto community and legal experts will be watching closely, anticipating a verdict that could set a precedent for years to come.