A group of experts in law, finance with experience in blockchain technology have come together to provide their support for Coinbase’s defence against the SEC. These briefs argue that the SEC is interpreting ‘investment contract’ incorrectly, which could be harmful to the crypto-currency industry if accepted.
At the beginning of 2021, the US Chamber of Commerce filed a legal document arguing that the SEC had caused damage to both Coinbase as well as many other business entities. This June, Coinbase was taken to court by the SEC for supposedly not registering with them and also not making sure that digital assets sold through their platform belonged within securities definitions.
Critics have expressed their concerns that the SEC’s definition of a digital asset could be too wide-ranging, leading to things like commodities and collectibles being categorized as securities. They also point out that lots of digital assets don’t rely on the efforts of other people for them to hold value.
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The court was urged to take into account whether cryptocurrencies purchased on websites like Coinbase can be categorized as unregistered securities by eminent legal experts from universities including Yale, Chicago, and UCLA. The main query is whether or not these instruments abide by the Exchange Act of 1934 and the Securities Act of 1933.
In a statement that she submitted, Wyoming Senator Cynthia Lummis expressed her concerns about the Securities and Exchange Commission’s (SEC) level of authority. The SEC’s recent action against Coinbase, according to Lummis, is unconstitutional because it restricts Congress’ ability to regulate activities in the cryptocurrency industry.
The venture capital firms Andreessen Horowitz and Paradigm also expressed concerns about the approach taken by the SEC’s wider ramifications. They worry that the SEC’s expansive definition of the term “investment contract” may impose restrictions on both new and established businesses, stifling innovation and raising compliance costs.
The Chamber of Progress, the Blockchain Association, the Crypto Council for Innovation, and the Consumer Technology Association all submitted a joint amicus brief as supporters of blockchain technology. They reaffirm worries that the SEC’s use of the investment contract definition to define digital assets could stifle innovation and entrepreneurship in the technology and digital sectors.
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These proponents emphasize the “major questions doctrine,” which states that administrative agencies should not assert any authority that Congress has expressly denied them. They contend that precise definitions are necessary for market stability, growth, and the promotion of investment in new technologies.
