A US-based trade association representing cryptocurrency firms is advocating for the dismissal of an insider trading case initiated by the Securities and Exchange Commission (SEC). The association contends that the SEC has unjustly categorized certain crypto assets as securities.
The case in question involves a former product manager at Coinbase and two associates, who face accusations of insider trading. The Chamber of Digital Commerce, the trade group, is urging a federal court to dismiss the proceedings, cautioning that the case could have far-reaching detrimental effects on the digital assets industry.
Central to the Chamber’s concern is the SEC’s classification of some crypto assets as securities rather than as commodities or currencies. The regulatory landscape for digital assets has been a pressing issue, especially following the collapse of the crypto exchange FTX in November.
While major regulatory bodies have issued statements and consultation papers regarding the regulation of digital assets, none have yet implemented comprehensive rules addressing the entire sector. A significant hurdle remains in categorizing various digital or crypto assets.
In the SEC case, the defendants allegedly bought 25 crypto assets for profit based on insider knowledge, with nine of those categorized as securities. The Chamber of Digital Commerce argues that the SEC is attempting to impose regulations through enforcement actions without prior agreement on rules or categories from the industry or Congress.
Perianne Boring, the founder and CEO of the Chamber of Digital Commerce, expressed her views, stating, “We consider this regulation by enforcement because it’s creating new legal precedent through an enforcement action; it would be much better for the entire industry if we just had clear rules to the road.” She emphasized that the SEC should have either established explicit rules or awaited legal clarity from Congress.
This is not the first instance of this issue. The SEC has consistently maintained that certain crypto assets, particularly crypto tokens, should be classified as securities, thereby falling under existing securities laws. Meanwhile, some participants in the crypto market argue that this classification could expose token manufacturers to regulatory scrutiny and private lawsuits, potentially harming the value of the tokens in question.