Paradigm accuses SEC of bypassing rules in Binance lawsuit
Paradigm claimed the SEC is attempting to use the allegations in its complaint to alter the law without adhering to the established rulemaking process.
Venture capital firm Paradigm has criticized the United States Securities and Exchange Commission (SEC) for bypassing the standard rulemaking procedures in its current legal action against the cryptocurrency exchange Binance.
In a statement released on Friday, Sept. 29, Paradigm stated the SEC is attempting to use the allegations in its complaint to alter the law without adhering to the established rulemaking process. Paradigm firmly believes that the SEC is exceeding its regulatory boundaries and further stated that it strongly opposes this tactic.
In June, the SEC initiated legal action against Binance, accusing it of multiple violations of securities laws, such as operating without the necessary registration as an exchange, broker-dealer or clearing agency. Paradigm also underscored that the SEC has been pursuing similar cases against various cryptocurrency exchanges lately and voiced apprehension that the SEC’s stance “could fundamentally reshape our comprehension of securities law in several critical aspects.“
Additionally, Paradigm highlighted concerns regarding the shortcomings of the SEC’s application of the Howey test. The SEC often relies on the Howey test — originating from a 1946 U.S. Supreme Court case involving citrus groves — to determine whether transactions meet the criteria for investment contracts and fall under securities regulations.
In its amicus brief, Paradigm asserted that many assets are actively marketed, purchased and traded based on their profit prospects. Nevertheless, the SEC has consistently exempted them from being classified as securities. The brief further pointed out instances such as gold, silver and fine art, underscoring that merely having the potential for value appreciation does not inherently classify their sale as a security transaction.
Related: Binance Russia buyer tightlipped on owners, denies CZ involvement
USD Coin (USDC) issuer Circle has recently become a participant in the ongoing legal dispute between Binance and the SEC. Circle believes the SEC should not categorize stablecoins as securities.
Circle argues that these assets should not be categorized as securities because individuals acquiring stablecoins do not do so to derive profits.
Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?
