KEY POINTS
- The CCI blasted the regulator for depriving market players of 'fair notice as to what is permissible'
- The USCC said the SEC was ignoring 'regulatory uncertainty' that comes with its enforcement-first approach
- Sen. Lummis of Wyoming previously called out the regulator for its 'out of step' actions toward the crypto industry
Cryptocurrency and lobbying groups have filed amicus briefs to support crypto exchange platform Coinbase in its call for the U.S. Securities and Exchange (SEC) to provide clear rules for crypto-related businesses.
In its amicus brief – an argument filed by an individual or entity who isn't a party to an action but has an interest in the matter – the Crypto Council for Innovation (CCI) said that "traditional rulemaking is necessary for the SEC to honor its longstanding promise to protect honest business." It added that the financial regulator's continuous refusal to engage in substantive rulemaking "perpetuates an unworkable regulatory black hole."
The CCI also wrote Tuesday that the SEC's refusal to clearly explain how the current regulatory framework sufficiently works for the crypto industry only deprives market players of "fair notice as to what is permissible" for crypto players, and it chills innovation in the emerging sector. It argued that the regulator is attempting to "enshrine its regulation-by-enforcement approach."
In its amicus brief, the U.S. Chamber of Commerce (USCC), the world's largest business lobbying group, accused the SEC of ignoring the "regulatory uncertainty" brought about by its enforcement-first approach to the cryptocurrency and digital assets industry. Such action "leaves regulated parties struggling to determine how they can comply with regulations, if they can at all."
The lobbying group questioned why the regulator was referring parties it accuses of violating laws to "existing regulations without elaboration."
"The SEC's failure to provide clarity for this important new industry offers a case study in the dangers of refusing to adapt regulation to new circumstances," it argued.
Calls to question the SEC's approach toward crypto and digital assets stem from its June 2023 lawsuit against Coinbase, wherein it alleged that the exchange was selling unregistered securities and was operating an unregistered exchange/broker agency. Coinbase challenged the complaint, urging the regulator to define securities clearly and provide comprehensive regulations focused on the sector.
Since then, Coinbase has received the support of crypto experts and even some lawmakers as the exchange continues to push the SEC to provide more clarification about crypto regulations and its definition of securities.
In mid-2023, a group of legal scholars filed an amicus brief to challenge the SEC's definition of an "investment contract," which is a contentious point in the regulator's complaint against Coinbase. Sen. Cynthia Lummis, R-Wyo., also slammed the SEC in an amicus brief at the time, saying the regulator's actions were "out of step" and "inconsistent with the approaches being taken in other jurisdictions."
Earlier this year, Bloomberg Intelligence senior litigation analyst Elliott Z. Stein said he believes Coinbase "would win full dismissal" in the case, considering how the crypto giant's defense was "more compelling."
