After years of legal introduction, it appears that the US Securities and Exchange Commission (SEC)'s battle against large segments of the cryptocurrency industry has finally reached its climax.
At a federal court hearing last week regarding the merits of the agency's lawsuit against Coinbase, and during a hearing yesterday regarding its case against Binance, SEC lawyers attempted to explain why many of the tokens on both cryptocurrency exchanges are considered unregistered offerings of securities. Illegally. At multiple points in both sessions, federal judges preside He seemed unconvinced.
One particularly emerging and sticky point for jurists is how the SEC defines cryptocurrency tokens in the context of securities law. Historically, the agency has gone after securities ChartsNot individual products; For example, the agency has successfully sued entities that enriched passive shareholders by investing in them Whiskey and orange groves. However, the agency has never sought to ban whiskey or oranges per se.
But in the past few months, lawyers for the federal regulator have vacillated between consideration sale Cryptocurrency tokens are in certain contexts illegal, and Blanket labeling Cryptocurrencies as securities In themselves. Before a federal judge at the Coinbase hearing last week, SEC lawyers presented the first argument; And in front of someone else, at the Binance hearing yesterday, they did the latter.
“I think the SEC has struggled to find clear, consistent language for what it considers a security in any of these cases,” said Kevan Sadeghi, a securities attorney who specializes in blockchain-related cases. Decryption. “The courts are beginning to recognize that this inconsistency in the SEC’s formulation of its position itself indicates a problem.”
Why did the SEC make one argument in one courtroom and a seemingly contradictory argument a day later, before a different judge, in a very similar case?
Sadeghi believes the answer boils down to a simple fact: The SEC doesn't know which reading of the law is correct, or even which reading will serve it best, because both arguments impose potentially huge liabilities.
“This is the rock and the hard place for the SEC’s positions,” Sadeghi said. “It seems that any position you take inevitably leads to one of these intractable problems.”
Take, for example, the argument made yesterday by SEC lawyers that many cryptocurrencies are themselves securities, regardless of context. What happens if the company behind the token fails, or the entire team involved in making the valuable token dies? Under a blanket definition, trading those tokens decades later is still considered passive participation in an illegal scheme — even though no such scheme exists.
So, it's understandable why SEC lawyers are making the argument they made last week, in the Coinbase hearing, that these matters are due to… Context Where the crypto token is sold. But this reading also suffers from problems, according to Lewis Cohen, a lawyer who specializes in cryptocurrency and securities regulation.
“Once you break away from the ‘token itself is a security device’ argument, you have to formulate an alternative theory,” Cohen said. Decryption. “Judges are very resistant, because they can't understand what that actual theory is. The SEC continues to vacillate on what that theory is… [they] “I cannot formulate a clear theory.”
Drawing such a clear line — determining which types of cryptocurrencies are illegal offerings of securities, and which are not — is a task that has dogged the SEC for years. Time and time again, cryptocurrency companies have asked for this kind of clarity on the types of cryptocurrencies the SEC offers. He was Allow. Over and over again, such requests were made It was rejected.
Implicitly, industry leaders took this as an unwillingness to point it out Outright hostility From the SEC's current leadership to the framework that would allow… any Cryptocurrency is legal in the United States.
Furthermore, illustrating any factual argument as to why Bitcoin exists e.g Completely legal But Ethereum notIt will likely be a daunting task that could back the SEC into a corner.
“They have no explanation,” Cohen said of the agency approving Bitcoin but rejecting Ethereum, a similar decentralized blockchain network with native code maintained by a team of core developers. “Because at the end of the day, there really is nothing.”
After years of enforcement actions being settled out of court, or imposed on entities with fewer resources, the SEC's vague theories about crypto securities are now finally facing scrutiny in well-financed legal battles, Sadeghi said.
However, he believes the final word on the matter will likely not come until the SEC's lawsuits against heavyweights Coinbase, Binance, and Xbox are filed. Ripple Labs It was decided upon, and then most certainly appealed.
“Once these cases reach the Court of Appeal, things get more interesting, and they will start to set some sort of binding precedent for other courts to follow,” the plaintiff said. “This is where the real battles will be fought.”
Edited by Andrew Hayward
