Crypto Venture Capital Firm Paradigm Challenges SEC’s Actions Against Binance
Crypto venture capital firm Paradigm has filed a brief accusing the Securities and Exchange Commission (SEC) of bypassing the rulemaking process in its ongoing case against Binance. Paradigm argues that the SEC is using the allegations in its complaint to change the law without following proper procedures. The firm states that the SEC is acting beyond its authority and opposes this tactic.
The SEC filed a lawsuit against Binance in June for alleged violations of securities laws, including operating as an unregistered exchange, broker-dealer, and clearing agency. Paradigm notes that Binance is just one of many cases brought by the SEC against crypto exchanges recently. The firm believes that the SEC’s position could disrupt existing securities law in significant ways.
Challenging the Howey Test
The SEC often relies on the Howey Test, established by a 1946 Supreme Court case, to determine whether transactions qualify as investment contracts and fall under securities laws. However, Paradigm argues that there are numerous assets that are bought and sold for potential profit but are not considered securities. The firm cites examples such as gold, silver, and fine art to support its argument.
Circle Weighs In
Circle, the company behind the stablecoin USDC, has also expressed its opinion on the SEC’s case against Binance. Circle points out that Binance has its own stablecoin called Binance USD (BUSD). The company raises concerns about the SEC’s claim that Binance sold BUSD as an unregistered security, stating that it raises legal questions impacting digital currency and the broader U.S. economy.
Hot Take: Paradigm and Circle Challenge SEC’s Authority in Binance Case
Both Paradigm and Circle have filed amicus briefs in the SEC’s case against Binance, challenging the agency’s actions and interpretations of securities laws. They argue that the SEC is overstepping its authority and attempting to change the law without following proper procedures. These challenges could have significant implications for the crypto industry and the regulatory landscape surrounding digital assets. It remains to be seen how the court will consider these arguments and whether they will impact the outcome of the case.
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