The ongoing battle between the U.S. Securities and Exchange Commission (SEC) and Binance, a global cryptocurrency exchange, has received vocal support from the U.S. Chamber of Digital Commerce, a prominent crypto advocacy group.
In an amicus brief filed on Oct. 19, the organization asserted that the SEC’s actions against Binance’s U.S. operations are akin to “suing the equivalent of a grocery store selling oranges and other fruit.”
SEC’s understanding is flawed
The Chamber’s brief reflects growing concerns within the cryptocurrency industry that the SEC’s regulatory stance is stifling financial innovation and driving crypto startups away from the United States. The group further contends that the SEC’s understanding of crypto assets is fundamentally flawed.
The Chamber stated in the filing:
“Tokens alone are not securities, and the markets where they are available to buy and sell are not securities exchanges.”
Under the leadership of Chairman Gary Gensler, the SEC has initiated numerous enforcement actions against digital asset companies, including some of the largest cryptocurrency exchanges globally, such as Binance, Coinbase, and Kraken.
The alleged violations include offering unregistered staking-as-a-service products and listing coins potentially violating securities laws. These exchanges have countered these claims by arguing that the SEC has not provided clear guidelines regarding which cryptocurrencies qualify as securities.
Misclassification
The lobbying group has criticized the SEC’s approach, claiming it fails to distinguish between “the subject of an investment-contract security” and “the investment contract itself.”
According to the Chamber, this failure has misclassified many crypto tokens as unregistered securities.
According to the brief:
“The SEC has adopted a regulation-by-enforcement approach, arbitrarily categorizing various blockchain-based digital assets as securities and penalizing businesses for failing to obtain SEC registrations that are not actually available to them.”
The trade body said that the U.S. has been a hub for the world’s digital economy, fostering the growth of major technology companies such as IBM, Microsoft, Netflix, Facebook, Amazon, Apple, and Google.
However, the burgeoning trillion-dollar blockchain economy is notably absent from the U.S. landscape due to what the Chamber describes as an “opaque and hostile” regulatory environment.
The Chamber’s amicus brief asserts that blockchain technology has the potential to revolutionize various industries, from supply chain management to pharmaceuticals. Still, the SEC’s regulatory approach is forcing many blockchain businesses to operate offshore.
The Chamber argues that the SEC’s lawsuit against Binance is an overreach and likens it to suing a grocery store for selling oranges. The group urged the court to distinguish between investment contracts and the assets themselves and calls for dismissing the case, claiming that the SEC’s actions have a detrimental impact on innovation and the digital economy.