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A concerted effort is underway to defend against the lawsuit filed by the United States Securities and Exchange Commission (SEC) against Binance. This lawsuit, rooted in allegations dating back to at least July 2017, claims that Binance, under the stewardship of CEO Changpeng Zhao, operated as unregistered exchanges, brokers, dealers, and clearing agencies, thereby generating substantial revenue primarily from transaction fees from U.S. customers1. In light of these allegations, the Chamber of Digital Commerce, headquartered in the United States, has mobilized alongside a myriad of other businesses, groups, legal experts, and politicians to challenge the SEC’s lawsuit.

The core of this collective resistance is captured in a recent amicus brief. The document articulates a dual objective: firstly, to challenge the SEC’s mode of regulation through enforcement, and secondly, to halt the SEC’s initiative to regulate the cryptocurrency sector without explicit authorization from the United States Congress. The amicus brief underscores a broader industry sentiment concerning the SEC’s jurisdiction over digital assets, positing that the SEC lacks the necessary legislative mandate to classify all digital assets as securities.

Pivoting on this argument, the Chamber of Digital Commerce has petitioned the court to dismiss the SEC’s case against Binance. The grounds for dismissal underscore the SEC’s alleged overreach, the assertion that digital assets do not constitute investment contracts, and the claim that token transactions do not meet the Exchange Act registration requisites. This motion resonates with the stance of Binance.US, Binance Holdings, and CEO Changpeng Zhao, who have jointly filed a motion to dismiss the lawsuit, contending that the SEC has overstepped its authoritative boundaries.

Furthermore, Binance.US has voiced its concerns regarding the SEC’s latest requests for document discovery and depositions, denouncing them as unreasonable. This stance was fortified when Binance.US, a cryptocurrency exchange based in the United States, formally objected to the SEC’s request for additional information, submitting the necessary documentation to express its dissent.

The collaborative endeavor spearheaded by the Chamber of Digital Commerce not only signifies a robust defense against the SEC’s lawsuit but also underscores a broader industry pushback against the SEC’s regulatory approach towards the burgeoning cryptocurrency sector. This collaborative resistance illuminates the ongoing tension between regulatory authorities and cryptocurrency entities, a dynamic that continues to evolve amidst the unfolding legal discourse surrounding Binance.US.

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On September 29, 2023, Paradigm filed an amicus brief in the ongoing lawsuit between the U.S. Securities and Exchange Commission (SEC) and Binance, a leading cryptocurrency exchange. Paradigm is not an investor in Binance and has no direct financial interest in the lawsuit’s outcome. However, the firm believes that the SEC’s actions represent a form of government overreach that could have significant implications for the broader financial and crypto markets.

The SEC initiated legal action against Binance in June 2023, accusing the exchange of multiple violations of securities laws. These include operating without the necessary licenses and registrations as an exchange, broker-dealer, or clearing agency. The SEC’s investigation into Binance began in May 2023. In its amicus brief, Paradigm argues that the SEC is attempting to change existing laws without adhering to the established rulemaking process, thereby acting outside its regulatory scope.

Paradigm’s brief raises several critical points that challenge the SEC’s interpretation of securities law. The firm argues that the SEC’s expansive interpretation of “investment contract” could bring a wide range of asset sales under the purview of securities laws. Paradigm also highlights flaws in the SEC’s application of the Howey test, a legal standard used to determine what constitutes a security.

Circle, a stablecoin services company specializing in blockchain technology, has also been brought into the legal battle between Binance and the SEC as well. Circle argues that stablecoins, a type of cryptocurrency designed to maintain a stable value, should not be treated as securities, adding another dimension to the ongoing case.

Paradigm emphasizes that regulatory gaps do exist in the crypto sector and that it is Congress’s responsibility to fill these gaps. This perspective aligns with SEC Chair Gary Gensler’s Congressional testimony, where he acknowledged the SEC’s limitations in regulating crypto secondary markets.

Paradigm’s amicus brief serves as a significant counterpoint to the SEC’s actions against Binance and other crypto exchanges. By challenging the SEC’s authority and interpretation of securities law, Paradigm adds a layer of complexity to an already intricate legal landscape. The firm’s stance could potentially influence how securities laws are applied to the crypto industry in the future.

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Tag: AMICUS BRIEF

Chamber of Digital Commerce Joins Forces to Counter SEC’s Lawsuit Against Binance.US

Paradigm Challenges SEC’s Authority in Lawsuit Against Binance