In its recent insider trading investigation involving former Coinbase workers, the United States Securities and Exchange Commission (SEC) has once more been criticized of breaching its bounds and arbitrarily classifying crypto assets as securities.
The American Chamber of Digital Commerce stated in an amicus brief filed on February 22 that the case should be dismissed because it would further the Commission’s “regulation by enforcement” campaign and attempt to define secondary market transactions as securities transactions.
According to Perianne Boring, founder, and CEO of the Chamber of Digital Commerce, This case reflects a subtle, yet dramatic and unprecedented effort to broaden the SEC’s jurisdictional reach and threatens the viability of the U.S. marketplace for digital assets.
The Chamber emphasized that the intrusion into the digital assets market had never received congressional approval and cited earlier Supreme Court decisions holding that regulators must first receive authorization from Congress.
SEC endangering the same crypto investors it should be protecting?
The Chamber additionally stated on Twitter that by acting without Congressional approval, the commission continues to contribute to a chaotic regulatory environment, endangering the same investors it is charged to safeguard.
The Chamber further argued that the commission was effectively asking the court to uphold that secondary market trades in the nine digital assets mentioned in an insider trading case against a former Coinbase employee constitute securities transactions by bringing claims of securities fraud, which it suggested was “problematic.”
In the context of an enforcement action against third parties who had nothing to do with producing, disseminating, or promoting those assets.
The Chamber cited the LBRY v. the commission’s case in support of its argument that secondary market transactions should not be classified as securities transactions.
The judge was persuaded by a paper from business contract lawyer Lewis Cohen, who noted that no court had ever admitted the underlying asset was security since the famous SEC v. W. J. Howey Co. decision, which established the standard for assessing whether a security transaction occurs.
In a related filing on Feb. 13, advocacy group the Blockchain Association argued that the commission had overstepped its bounds in this matter and called it the latest volley in the Commission’s apparent continuous strategy of regulation by enforcement in the digital assets sector.