U.S. Securities and Exchange Commission (SEC) launched enforcement over digital asset linked organizations has left investors and market confused. In the recent turns of events, the commission responded to Binance’s motion to dismiss. Coinbase’s legal head pointed out several crucial points from the U.S.S SEC’s pleading in the court.
SEC’s broad authority claim
Paul Grewal, Chief Legal Officer of Coinbase stated that the commission again asserts that a virtually unlimited “flexibility of the securities laws” grants it complete authority over crypto exchanges. He pointed out that this entirely misrepresents the law.
He mentioned that the SEC’s claim to regulate crypto exchanges stands on categorizing digital assets as “investment contracts” or “securities” under federal law. However, in the Supreme Court’s Howey test, an investment contract must involve a contractual right to the profits, income, or assets of a business enterprise.
Grewal added that the U.S. SEC tries to prove it but fails to dispute that. The commission begins with a strawman that a formal contract is not required for an investment contract, he added. Meanwhile, no one is arguing that wet signatures on paper are required.
Watchdog’s misrepresentation of law
Coinbase’s legal head points out that the SEC’s argument misrepresents the law. The watchdog weighs on the point that investment contracts inherently require contractual obligations. However, Grewal claims that investment contracts require contractual obligations, as case law.
He further added the SEC’s assertion that the Major Questions Doctrine does not apply to crypto. The lawyer raised a question did the SEC just admit that Ethereum (ETH) is not a security? Meanwhile, the commission on p.47 says that Bitcoin (BTC) and ETH are the “largest crypto assets in existence but [are] not at issue here. This has led to speculations regarding the SEC’s stance on the regulatory status of major cryptocurrencies.
The U.S. SEC’s brief underscores why clarifying from the courts is so important. This directly calls for Congress to pass comprehensive crypto legislation in the country in order to these confusions.
