Rodrigo Seira, a legal expert from Paradigm, a crypto investment firm, has criticized the U.S. Securities and Exchange Commission (SEC) for its treatment of the crypto exchange Bittrex. He believes the SEC is wrongly trying to regulate secondary crypto markets and using a flawed method called the Howey test to support its claims.
Paradigm filed a document called an amicus brief on July 7, arguing that the SEC doesn’t have the authority to take action against Bittrex. Seira points out that even the head of the SEC, Gary Gensler, admitted that crypto exchanges lack proper regulation.
Seira also wrote in a blog post that the SEC should create clear rules for the crypto industry, as requested by Coinbase, another crypto exchange facing SEC scrutiny. He believes that crypto-assets are different from traditional investment contracts and shouldn’t fall under the SEC’s jurisdiction until specific regulations are in place.
The SEC first filed a complaint against Bittrex on April 17, and the exchange eventually gave up its license and filed for bankruptcy on May 8. This is the second time Paradigm has shown support for a crypto organization facing legal action from the SEC, as it previously supported Coinbase in a similar legal battle with the SEC.
On the other hand, the SEC lawsuit against Coinbase on June 6th has caused panic in the market, leading to increased withdrawals of Ethereum staking on the platform. Since the lawsuit, around $65.7 million worth of cbETH (Coinbase Ethereum staking tokens) has been redeemed, surpassing other staking providers. Investors and customers are concerned about the lawsuit’s implications and are withdrawing their staked Ethereum from Coinbase.
Meanwhile, Binance has also experienced a significant decline in its share of trading volume among exchanges that support USD-to-crypto trading. Its market share has dropped to 4.35% from over 16% in April. This decline is attributed to the lawsuit filed against Binance by the United States Securities and Exchange Commission (SEC) in June.
Overall, Seira and Paradigm argue that the SEC is going after Bittrex and other crypto companies unfairly and that the lack of clear regulations has created confusion in the industry. They believe the SEC should establish proper rules to govern the crypto market.