Crypto firms and organizations have been filing supporting briefs in a lawsuit filed by a Texas apparel company and the DeFi Education Fund (DEF) against the United States Securities and Exchange Commission over its clarification of crypto assets and lack of rules.
Crypto and venture capital companies, including Coinbase, Andreessen Horowitz, Multicoin Capital, Paradigm, Union Square Ventures, and Variant, voiced their support for Texas-based Beba LLC and the DeFi Education Fund’s lawsuit in an amicus brief filed on Oct. 28.
“The SEC is wrong to ignore the harm that companies like Beba suffer from the threat of enforcement and the lack of clear guidelines,” the brief stated.
“The SEC has made this threat “credible” by bringing at least four enforcement actions alleging that airdrops of digital assets constitute “investment contracts,” and thus securities transactions.”
The suit, filed in March, sought a preemptive declaration that the SEC cannot enforce its “unwritten policy” that most digital asset transactions are securities.
It specifically mentions the free distribution, or airdrop, of the clothing firm’s own digital token, BEBA, which the SEC labeled “investment contracts” in violation of the 1933 Securities Act.
The SEC asked the court to toss the lawsuit in July, claiming that it was “premature and premised on a phantom policy” and that Beba did not define a rule or order relating to the policy it objected to.
The amicus brief concluded that the plaintiffs have adequately pleaded a “credible threat of enforcement and cognizable harm,” and the SEC arguments to the contrary should be rejected, and its motion to dismiss denied.
Snippet from the amicus brief. Source: Law360
The Texas Blockchain Council and Investor Choice Advocates Network made similar arguments in their amicus brief, stating that the SEC has “engaged in this litany of enforcement actions while refusing to offer critically needed guidance to the public through the rulemaking process.”
Related: SEC crypto enforcement hits $4.7B this year, rising 3,000% from 2023
Crypto policy think tank Coin Center, which filed a separate brief on Oct. 22, asserted that Beba backer, the DeFi Education Fund, was also justified in suing the SEC due to expenses incurred over the regulator’s stance toward crypto.
“When an agency like the SEC refuses to engage in rulemaking or to provide a genuine mechanism for affected parties to participate in the regulatory process, and chooses, instead to prove its public policy choices in the courts, it leaves organizations like DEF with no political avenue to address their concerns aside from those very courts,” it stated.
Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?