U.S. crypto exchanges have found themselves in a tussle with regulators in recent months, as the U.S. Securities and Exchange Commission (SEC) attempts to outlaw crypto from the inside. The Chamber of Digital Commerce, a nonprofit trade association that engages government officials on the use of crypto and blockchain, has responded with a legal filing to the U.S. District Court in Washington, D.C.
It all started with a case brought by the SEC against former Coinbase (COIN) employee Ishan Wahi, accusing him of insider trading. Last year, the U.S. Department of Justice (DOJ) charged Wahi with wire fraud for sharing information with his brother, Nikhil Wahi, and friend Sameer Ramani regarding which tokens would be listed on the exchange’s platform before they went live. The SEC swiftly followed suit with the same insider trading allegations.
Perianne Boring, the founder of the Chamber of Digital Commerce, said that what the SEC is doing is another example of ‘regulating by enforcement’ and does nothing to define “what sort of digital asset transactions it considers to be securities transactions.” According to Boring, nine of the supposedly 25 crypto assets the trio purchased and sold could be defined as securities and this could lead to further legal battles for other crypto companies that list the tokens.
That’s why Boring’s group filed an amicus brief— officially known as a “friend of the court” (amicus) brief— arguing that the SEC’s crackdown is an example of “backdoor rulemaking”. Binance, the largest crypto exchange in the world, and itself in the crosshairs of U.S. regulators, is among one of the contributors to the Chamber’s legal filing.
The filing states: “Under Supreme Court precedent, the agency’s authority to expand its regulatory writ to virtually all transactions touching upon a digital asset is a major question requiring clear Congressional authorization. But the SEC has never been granted such authority, and legislation pending before Congress makes very clear that it likely never will be.”
The filing further argues that the only regulatory guidance provided by the SEC has been in “the form of nonbinding speeches and statements that have been conflicting from administration to administration.”
Additionally, Wahi’s lawyers have since filed a motion to dismiss the SEC’s securities fraud charges, claiming the tokens listed were utility-based and not investment contracts. The Chamber supports this motion, stressing that it takes no sides on insider trading accusations and disagrees that secondary market trades of digital assets are securities transactions.
The Chamber of Digital Commerce isn’t the only organization to oppose the SEC in the Coinbase insider trading case. Earlier this month, the Blockchain Association also filed a similar brief, saying that the SEC has done more to confuse rather than clarify the application of U.S. securities laws.
The SEC case against the Coinbase employees could have serious consequences for the entire crypto industry if a court ruling embraces the agency’s position and endorses its tactics. That’s why it’s essential that organizations like the Chamber of Digital Commerce continue to fight for the crypto industry’s rights and freedoms by providing sound legal backing when needed.
