In the ongoing legal battle between the United States Securities and Exchange Commission (SEC) and the prominent cryptocurrency exchange Coinbase, a growing wave of support is emerging for the regulatory authority.
Two amicus briefs were submitted on Tuesday, reinforcing the SEC’s central argument that digital assets should be categorized as securities, thereby falling under its jurisdiction for regulation.
This stance has previously raised concerns within the cryptocurrency industry, with many questioning the extent of regulatory oversight and its potential impact on the industry’s future.
A comprehensive brief from the North American Securities Administrators Association (NASAA) emphasized that platforms like Coinbase function similarly to traditional securities exchanges but lack the necessary regulatory scrutiny, potentially endangering investors.
NASAA is an organization comprising securities regulators from the United States, Canada, and Mexico, dedicated to safeguarding investors and fostering efficient securities markets.
The brief underscored the belief that traditional securities laws should naturally extend to the cryptocurrency sphere. NASAA stated, “Digital assets with characteristics typical of securities offer investors the same promise of a return and carry the same risks that led to the enactment of federal securities laws.”
The SEC’s lawsuit against Coinbase is rooted in allegations that the exchange violated the Securities Exchange Act of 1934 and the Securities Act of 1933. The eventual outcome of this case could establish a precedent that shapes the United States’ regulatory approach to digital assets in the years to come.
The central claim in this legal dispute is that Coinbase operated as an unregistered securities exchange, broker, and clearing agency while also offering and selling unregistered securities.
At the heart of these allegations is the SEC’s assertion that Coinbase’s staking program and several of the digital assets traded on its platform qualify as “investment contracts,” subjecting them to federal securities laws.
Consequently, NASAA contends that these assets fall squarely within the purview of federal securities laws. This perspective aligns not only with the SEC’s public position but also resonates with the views held by state securities regulators and many digital asset issuers.
While digital assets often dominate headlines due to their volatility and emerging technology, their relative scale within the vast U.S. economy remains modest, according to NASAA.
A Second Brief Supports the SEC
Amplifying the ongoing regulatory discourse, another amicus brief was filed on the same day by Professor Todd Phillips from the J. Mack Robinson College of Business at Georgia State University and Beau Baumann, a doctoral candidate at Yale Law School.
Leveraging their expertise in financial regulations and administrative law, these scholars voiced their support for the SEC’s stance. Their argument revolves around the historical significance and boundaries of the “major questions doctrine.”
The “major questions doctrine” is a legal rule in the United States that states Congress must explicitly specify if it intends to grant an agency authority over significant economic or political matters, rather than implying such authority through legislation.
Phillips and Baumann highlighted recent Supreme Court decisions, emphasizing that any attempt by Coinbase to redefine or narrow the interpretation of the doctrine might exceed its legal bounds.
Both NASAA and the scholars’ brief converge on several key arguments, including the potential misconstruing of the doctrine’s scope by Coinbase in light of recent court rulings. They also acknowledged Congress’s intentionally broad definition of “security,” designed to encompass a wide range of investment forms, particularly in response to the financial turmoil following the 1929 stock market crash, as the SEC contends.
Both briefs emphasize the importance of regulatory agencies like the SEC in applying existing laws to evolving financial landscapes. Waiting for explicit directives from Congress in rapidly changing markets could impede regulatory effectiveness, as both parties argued.
