If you’ve not been living under a rock, then you’ll know that the US Securities and Exchange Commission (SEC) has been pushing crypto businesses offering securities—to follow the same rules as traditional stock and bond exchanges. Since the implosion of FTX, the agency has only intensified its crackdown on crypto companies.
In June, the SEC sued Coinbase and Binance, two of the biggest players in the crypto space, for deceptive practices. The US regulator alleges that both of them broke securities law—by selling unregistered securities.
NASSA’s resounding no to ‘special treatment’ of Crypto
Coinbase has defended itself, saying the digital assets and securities it sold did not qualify as securities. It has gone so far as to accuse the SEC of overstepping its authority. But the crypto exchange’s arguments have prompted strong opposition from an association of North American securities regulators.
In an Oct. 10 filing in the New York District Court, the North American Securities Administrators Association (NASAA) argued that cryptocurrencies should not be considered as “somehow special.” The body representing North American securities regulator further said that the SEC acted within its jurisdiction when it took legal action against crypto exchange Coinbase for alleged violation of securities law.
“The SEC’s theory in this case is consistent with the agency’s longstanding public position […] It is also well within the bounds of established law,” said NASAA general counsel Vincente Martine. He argues that it’s unnecessary for the SEC to get prior approval from the Congress before applying established law to digital assets.
Gensler’s position on Crypto
The SEC’s Chair, Gary Gensler, has argued time and time again that most crypto tokens are securities—and therefore should be governed by the agency. Therefore, the court’s application of the Howey test – a set of standards used to determine whether a transaction qualifies as an “investment contract” or securities is crucial.
Coinbase’s future in US hinges on court’s application of Howey test
Crypto companies, including Coinbase, have long insisted that digital assets don’t meet the Howey test for being a security. However, Martinez contends that the Howey test was intended to encapsulate all kinds of technological advancements in securities, even securities traded and sold on blockchains. The SEC has made similar arguments in the past.
“The Court should reject Coinbase’s attempt to narrow and misapply the established legal framework in order to avoid being subject to the same regulatory obligations as all other participants in the Nation’s securities markets, ” Martinez was quoted as saying by media.
“The Court should decline to treat digital assets as somehow special.”
A month after slapping Coinbase with a lawsuit, the SEC had in July accused it of deliberately violating securities law. The regulator had also asserted that that court should dismiss Coinbase’s arguments that the SEC’s lawsuit violated major questions doctrine and other concerns.
