Crypto trading group criticizes SEC insider trading case
A US-based trade association representing crypto firms has requested the dismissal of an insider trading case brought by the Securities and Exchanges Commission (SEC), arguing that the regulator has wrongly labeled crypto assets as securities.
The case involves a former product manager at the crypto exchange Coinbase and two employees who are accused of insider trading.
However, the Chamber of Digital Commerce trade group has asked a federal court to dismiss the case, arguing it could have far-reaching and negative consequences for the digital assets sector.
At the heart of the association’s concern is the SEC’s apparent labeling of some cryptoassets as securities, as opposed to commodities or currencies.
The regulation of the digital asset market has long been seen as a critical issue, but has become more urgent following the collapse of crypto exchange FTX in November.
But while major regulators have all made proclamations or launched consultation documents on the subject, none have yet enacted specific rules covering the entire sector. One of the points has been how different digital or crypto assets will be categorized.
In the SEC case, the defendants are accused of buying 25 crypto assets for profit based on insider knowledge. Nine of these 25 assets are categorized as securities.
The Chamber of Digital Commerce argues that the SEC is trying to bring in regulations through the back door and before any rules or categories have been agreed upon by the industry and mandated by Congress.
“We are considering this regulation by enforcement because it sets new legal precedent through an enforcement action, but it would be much better for the entire industry if we just had clear rules for the road,” said Perianne Boring, founder and CEO of the Chamber of Digital Commerce, in comments reported by Reuters.
Instead, the SEC should have published a rule outlining its expectations or waited for legal certainty from the US Congress.
This is not the first time this problem has arisen. The SEC has long argued that certain crypto assets, such as crypto tokens, should be classified as securities and subject to existing securities laws.
Meanwhile, some players in the crypto market have argued that this will expose some token producers to government and regulatory actions and even private lawsuits. In addition, the value of tokens is likely to suffer negatively from such a decision.
