Paul Grewal, Coinbase’s Chief Legal Officer, said on July 4 that the U.S. Securities and Exchange Commission’s (SEC) interpretation of “investment contract” violates the law according to a recent Supreme Court advisory.
In a July 4 Twitter wire, Grewal claimed that the SEC’s interpretation contradicts the Supreme Court’s Major Questions Doctrine opinion of the Nebraska case. He added that switching “secretary” for “chairman” and “digital assets” for “student loans” showed that the financial regulator’s interpretation is against the law.
The judgment of the Supreme Court
The opinion Grewal is referring to was the apex court ruling Biden against Nebraska on the legality of student loan forgiveness. The Supreme Court disagreed with the education secretary’s attempt to create a student loan forgiveness program using the HEROES Act, saying the act does not grant such powers.
Grewal claimed that the Court’s reasoning in the student loan case could also challenge the SEC Chairman’s interpretation of investment contracts, including cryptocurrencies. Chairman Gary Gensler has repeatedly argued that the current securities law adequately regulates the crypto industry.
Coinbase’s executive alleges that the “economic and political significance” of the SEC supposedly overstepping its boundaries by claiming authority over all digital assets except BTC is not only “staggering” but also ignores the fundamental requirement for enforceable rights between a company and a buyer. .
“The “economic and political significance” of falsely claiming authority over all digital assets except BTC is not only “staggering” but separate from the fundamental requirement that there be enforceable rights between company and buyer.”
Meanwhile, Grewal noted that Congress could solve this issue regarding investment contract standards by passing legislation in the future. Several US legislators are working on various bills to bring regulatory clarity to the crypto industry.
How the SEC interprets the investment contract
Despite the lack of specific laws regulating cryptocurrencies in the US, the SEC claims that applying the Howey test classifies most cryptocurrencies as securities.
On its website, the SEC stated:
“The U.S. Supreme Court’s Howey case and subsequent case law established that an ‘investment contract’ exists when money is invested in a joint venture with a reasonable expectation of profit from the efforts of others.”
While several stakeholders disagreed with this view, the regulator has labeled more than 60 crypto-assets as securities based on its interpretation in various court cases.
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