Beba SEC Lawsuit Backed By The Entire Industry

Key Points:

• Coinbase filed an amicus brief supporting the Beba SEC lawsuit, arguing that unclear and inconsistent regulations harm the digital asset industry.
• Major crypto groups and firms, like OpenSea, Uniswap, and Robinhood, face similar regulatory scrutiny, with Wells Notices issued as part of the SEC’s intensified regulatory efforts.

In the swelling legal opposition against the U.S. Securities and Exchange Commission, cryptocurrency exchange Coinbase, in support of the Beba SEC lawsuit, filed an amicus brief.

Read more: Coinbase SEC Lawsuit Continues With Seeking Summary Judgment

Coinbase Joins Beba SEC Lawsuit With An Amicus Brief

Criticizing the Commission’s regulatory approach, the brief postulates that this constitutes an “arbitrary regulation-by-enforcement campaign” against digital asset companies in the absence of clear offering guidance. According to Coinbase, this has left the industry in a Catch-22 wherein firms cannot determine standards for compliance against shifting regulatory interpretations.

Coinbase’s brief also emphasizes those moments when the SEC has given conflicting answers to questions about digital assets. For example, Coinbase cited how, in 2018, the SEC stated that digital assets were not securities, only to change its mind in 2021 to say they were “investment contracts.” This is another example of the uncertainty that has gone along with regulation in this industry.

Crypto Industry Pushes Back Against Regulatory Pressure from SEC

The Beba SEC lawsuit, filed in support by the crypto exchange in March, directly challenged the application of the Howey Test to token airdrops. They held that airdrops shouldn’t be part of the securities law, whereby tokens are given out with or without many times profit expectation.

Under the longstanding legal test set in Howey, the gold standard for what constitutes an “investment contract,” an expectation of profit derived from the efforts of others, is a necessary element, which DeFi Education Fund and Beba say does not exist with airdrops.

Powerful lobbying groups, Blockchain Association and the Crypto Council for Innovation, have similarly filed amicus briefs, while Coinbase has joined to support the Beba SEC lawsuit. Their argument, unified, implores the court to force the SEC to define its stance on token distribution and to stop what they term overreach in enforcement under the regulations.

The case is the latest as the SEC steps up regulation of the crypto industry. Companies including OpenSea, Uniswap, and Robinhood have all received Wells Notices, the official formal letter that signals potential enforcement action.