The U.S. Chamber of Commerce filed an amicus brief in support of Coinbase in the SEC battle, blasting the Securities and Exchange Commission's “haphazard, enforcement-based approach” to ether, Coinbase, and the broader crypto industry.
In the brief filed to the U.S. Court of Appeals on May 9, the Chamber argued that the SEC’s refusal to establish clear rules for digital assets places unacceptable risks on the $1 trillion industry, discourages further investments, and undermines innovation.
The Chamber of Commerce boasts approximately 300,000 members and indirectly represents more than three million businesses and professional organizations across all industry sectors, which makes it the world’s largest and possibly most influential business advocacy group. In a filing, the Chamber emphasized its duty to act in the interests of its members, many of whom are subject to U.S. securities laws that may be adversely affected by the SEC’s current approach to crypto.
To that end, the Chamber frequently files amicus curiae briefs in cases that concern its members. In legal speak, an amicus brief refers to a legal document filed with a court by a third party who is not directly involved in the case but has a strong interest in the outcome and wants to provide additional information or arguments to the court to support one of the parties.
Coinbase took legal action against the SEC last month, filing a complaint that sought to compel the regulator to respond to the exchange’s rulemaking petition it initiated in July 2022. Coinbase demanded the Commission to answer some basic questions, including “Which digital assets are securities?”
Despite being legally obliged to respond to the petition within a “reasonable amount of time,” the SEC never offered a formal response to the request. Instead, Chairman Gary Gensler reiterated that existing security laws are adequate for digital assets and there is no need for new regulations. Around the same time, Coinbase was issued a Wells notice for “potential violations of securities law,” to which the exchange responded by taking the case to court.
In its brief, the Chamber criticized the SEC for its refusal to engage in the rulemaking process for the industry, alleging that the agency intentionally chooses to target crypto firms in lawsuits for not adhering to the law that is vague enough to be applied to almost any digital asset.
“By proceeding through enforcement, the SEC has denied the public any opportunity to comment on its invocation of Depression-era laws to assert jurisdiction over a trillion-dollar industry predicated on an entirely new technological innovation,” the Chamber concluded.
The Chamber of Commerce isn’t the only organization wading into a legal fight on the side of Coinbase. Earlier this month, Paradigm, a crypto venture fund led by Coinbase co-founder Fred Ehrsam, filed another amicus brief in support of the exchange, accusing the SEC of imposing a “de facto ban on digital asset trading platforms” without a clear path to register with the agency.
What is Ether, really?
The Chamber also criticized the Commission’s silence on Ether’s legal status, which is a contested ground between the US two market regulators, CFTC and SEC. While the Commodity Futures Trading Commission maintained that Ether is a commodity, and therefore falls under its jurisdiction, the SEC, under Gensler’s leadership, keeps sending mixed signals, with Chairman recently refusing to elaborate on his agency’s stance when questioned at a congressional hearing.
“Ether has been around for almost a decade,21 has a market capitalization exceeding $220 billion, 22 and is a fundamental building block in the industry.23 Yet despite the ubiquity of ether, regulators still cannot agree on what it is,” the brief notes.
The association also condemned the SEC’s enforcement actions against two other crypto exchanges, Kraken and Bittrex. The former settled with the regulator by agreeing to pay a $30 million fine and shutting down its staking-as-a-service business in the US, while the latter recently filed for Chapter 11 bankruptcy after being hit with a lawsuit amid exit from the country.
“As a result, digital-asset companies have no choice but to consider the possibility of relocating or refocusing abroad, abandoning U.S. operations in favor of countries with more favorable regulatory environments,” the Chamber opined in its brief.