Leading Crypto Investment Firm Paradigm has challenged the US Securities and Exchange Commissionthe authority to regulate secondary markets for crypto assets.
The company has filed an amicus curiae brief in the SEC’s case against the cryptocurrency exchange. bittrexchallenging the regulator’s attempt to expand its jurisdiction over secondary crypto markets, Paradigm’s special counsel Rodrigo Seira said in a statement. a recent statement.
In the legal document filed with the court, Paradigm argued that the SEC’s claims against Bittrex and other crypto exchanges are fundamentally different from its previous cases against token sellers.
While the SEC previously sought to regulate fundraising schemes under the Howey test, Paradigm noted that the agency is now seeking to extend its authority to include subsequent sales of crypto assets.
“The SEC lawsuit against Bittrex is the first of three cases the SEC has filed in quick succession against crypto exchanges,” Seira wrote in the blog post.
As reported, last month the SEC sued both Binancethe world’s largest cryptocurrency exchange, and coin basethe largest US-based cryptocurrency exchange
“Through these actions, the SEC improperly attempts to reclaim secondary crypto markets.”
Bittrex, a Seattle-based exchange, announced in early April that it was shutting down its US operations due to the country’s challenging regulatory and economic environment.
Shortly thereafter, the SEC indicted Bittrex, its co-founder and former CEO William Shihara, and its foreign affiliate Bittrex Global for operating an unregistered national stock exchange, broker, and clearing agency.
The agency claimed that Bittrex had facilitated the buying and selling of crypto assets since at least 2014, earning at least $1.3 billion in revenue from transaction fees.
Less than a month after the SEC’s complaint against Bittrex US, the platform filed for bankruptcy in Delaware federal court in early May.
In the announcement, the exchange noted that the bankruptcy filing would not affect Bittrex Global, which serves clients outside of the United States. The exchange will continue to operate “as normal” for clients outside of the US.
Paradigm Accuses SEC of Inconsistent Stance on Crypto Regulation
Paradigm, which previously filed a similar amicus brief in support of Coinbase, criticized SEC Chairman Gary Gensler for his inconsistent stance on regulating secondary markets.
Paradigm argued that Gensler himself admitted that the agency lacked the authority to regulate these markets in 2021.
However, the SEC now claims it possesses the authority and seeks retroactive sanctions against companies that have not complied.
The investment firm also contended that even if a cryptocurrency asset was initially sold in an ICO, the SEC has no legal basis to argue that the asset itself constitutes an investment contract.
“Over the past six years, the SEC has brought dozens of enforcement actions against people who sold crypto assets as part of their fundraising efforts, with courts agreeing that some of those sales were offers of ‘investment contracts’ under the Howey’s test. said the company in court file.
According to Paradigm, the few courts that have examined the distinction between token offerings and tokens in secondary markets have recognized that the Howey test does not apply to transactions between third parties.
The firm concluded that the SEC’s theories were without precedent and urged the court to dismiss the case against Bittrex.
