SEC’s Coinbase Insider Trading Case Prompts Accusation Of Overreach By Trade Group

The Chamber of Digital Commerce, an advocacy group for the cryptocurrency and blockchain industries, has accused the Securities and Exchange Commission (SEC) of overreaching beyond its mandate in its latest allegations against Coinbase.

Chamber of Digital Commerce Slams SEC’s “Regulation by Enforcement” Campaign

The Chamber of Digital Commerce (CDC), based in the United States, submitted an amicus brief on February 22nd, expressing their disagreement with the Securities and Exchange Commission’s (SEC) “regulation by enforcement” campaign. The CDC claims it has gone beyond its authority by labeling cryptocurrencies securities in its case against former Coinbase staff for insider trading.

The brief advocates dismissing the case, asserting it mischaracterizes secondary market transactions as securities. The CDC founder and CEO, Perianne Boring, argues that this particular case displays a covert but “spectacular” and “never-before-seen” attempt by the SEC to widen its authority, which could endanger the US’s digital asset market.

The Chamber pointed out that Congress never sanctioned the SEC’s involvement in the digital assets market. Previous Supreme Court cases have established that regulators must obtain approval from Congress first.

Additionally, the Chamber observed that the SEC’s action without Congressional approval contributes to the disarray in the regulatory landscape, which ultimately harms the investors it is supposed to protect.

The Chamber argued that if the SEC were to bring forward claims of securities fraud relating to the nine digital assets mentioned in the insider trading case against the former Coinbase employee, it would essentially be asking the court to recognize that the secondary market trades in these assets constitute securities transactions, which could be considered problematic.

Perianne further expressed her worries about the SEC’s effort to classify these tokens as securities in the scope of an enforcement action against those who did not have any part in creating, distributing, or promoting such assets. In its brief, the Chamber referred to the LBRY v SEC case in which the court had determined that trades on the secondary market wouldn’t materialize as security exchanges.

This decision was based on a paper by commercial contract attorney L. Cohen, which noted that no court had ever conceded the asset in question was a security after the SEC v W. J. Howey Co. case ruling, which set a precedent for examining if a security transaction existed.

Blockchain Association’s Amicus Brief Challenges SEC’s Jurisdiction 

Meanwhile, the current legal opinion (amicus brief) is comparable to the one submitted by the Blockchain Association recently. It also claims that the SEC has gone beyond its jurisdiction in this situation and appears to be a part of the SEC’s ongoing enforcement strategy in the digital assets space.

An amicus curiae, otherwise known as a “friend of the court,” has submitted an amicus brief in connection to the case of the SEC v. Ishan Wahi, Nikhil Wahi, and Sameer Ramani. This brief provides the court with additional relevant information or understanding of the case, which may not be available to the involved parties.

This concerns the accusation that the three individuals had used covert information conveyed by Ishan to make $1.5M in profits from trading 25 distinct cryptos.

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