Crypto investment firm Paradigm has argued that the US Securities and Exchange Commission (SEC) is “wrongfully attempting” to oversee crypto secondary markets in an amicus brief to the ongoing SEC vs crypto exchange Bittrex case. According to Paradigm’s special counsel Rodrigo Seira, this case should be “dismissed”.
Seira stated that the SEC’s claims against Bittrex and other crypto exchanges are fundamentally different “from its many prior cases against token sellers” and represent an unreasonable use of the Howey test – a legal test used in the US to determine whether a transaction qualifies as an investment contract. He also argued that the regulator has no legal grounds to claim that a crypto asset itself is an investment contract, or that secondary market transactions in that asset are investment contract transactions.
In a blog post, Seira commented: “The court should dismiss this case and the SEC should join Congress in working on crypto legislation that supports innovation and protects investors.”
Paradigm has also supported an exchange facing legal action from the regulator before, filing a similar amicus brief in support of Coinbase in May. The US regulator charged Bittrex in April for operating an unregistered national securities exchange, broker, and clearing agency, which was followed by a Chapter 11 bankruptcy filing in a federal court in Delaware.
The SEC’s case against Bittrex was the first of three lawsuits against US-based crypto exchanges in recent weeks, including Binance and Coinbase. Prices of the tokens listed in the filings dropped as a result, though legal experts warned that the ultimate impact remains uncertain.
Head of digital asset research at data firm FundStrat, Sean Farrell, commented: “I’m not sure the lawsuits are a surprise to anyone following the SEC’s current playbook. They want to stifle the onramps with costly legal burdens such that everyone moves overseas.” Timothy Massad, former chairman of the CFTC, added that the “cases will be fundamental to the shape of crypto regulation” and will “affect people’s attitude towards trading”.
