Blockchain Association files amicus brief in Wahi case, says SEC exceeded authority
On February 13, the Blockchain Association filed a US Securities and Exchange Commission (SEC) lawsuit against former Coinbase Global product manager Ishan Wahi and his associates. The defense team expressed its support for the defendants’ dismissal argument, where they argued that the Securities and Exchange Commission exceeded its authority in this case. The case of the sale of nine tokens by unregistered securities is being heard in the US District Court in Western Washington.
Calling the case “the latest salvo in the SEC’s apparent ongoing strategy to regulate through enforcement in the digital asset space,” amicus curiae or “friend of the court,” the brief noted that the SEC had declared nine tokens securities without prior conclusions. The summary said:
“The SEC bundles the tokens themselves, which are just software after all, with any purported investment contract under which those tokens were allegedly sold.”
The summary does not discuss the defendants’ “core issues” argument, but only reminds the court of the 2022 West Virginia Supreme Court v. Environmental Protection Agency case, which found that the “fundamental issues” doctrine applies when federal agencies assert ” very important questions.” subsequent authority beyond what Congress can reasonably be understood to have granted.”
SEC listing of 9 tokens as securities in insider trading case ‘could have wide implications’ – CFTC
The summary highlighted three ways in which this case could harm the blockchain industry and the general public. First, the summary states that token creators for those particular tokens, holders and users “are not liable in this action and have no real way to oppose the SEC’s claims.”
Today we filed an amicus memo in the SEC v. Wahi. While the SEC’s strategy to advance its digital asset regulation program through enforcement action is well-documented, this case expands those efforts by trying to punish absent third parties.https://t.co/erHQvzucZZ https://t.co/jKHAI0EguF pic.twitter.com/AnBD75eSsJ
— Blockchain Association (@BlockchainAssn) February 14, 2023
The summary notes that the case is likely to be settled rather than dealt with on the merits, in line with historical trends. In this way, the Securities and Exchange Commission “maximized its chances of asserting whatever it wants with minimal risk of being held liable for it.”
Second, the SEC case could result in exchanges relisting the tokens in question, the summary says, and this could have a “chilling effect” on the blockchain industry. The summary said:
“Simply by declaring that a token is a security, the SEC assigns a “scarlet letter” to certain tokens, reducing their value, preventing any trading in the token on the secondary market, and hindering technological development.”
Finally, the summary argued that market participants cannot determine what is a security and what is not, and “the SEC has shown little willingness to answer these questions.”
Ishan Wahi and his brother Nikhil pleaded guilty to a criminal case brought against them for insider trading by the Department of Justice of the Southern District of New York. Their co-defendant Sameer Ramani remains at large.
The Blockchain Association is a nearly 100-member non-profit advocacy group that promotes “an innovative policy environment for the digital asset economy.”
Credit : cointelegraph.com