U.S. Senator Cynthia Lummis filed an amicus brief on August 11 supporting Coinbase’s motion to dismiss against the U.S. Securities and Exchange Commission (SEC) lawsuit. Drawing attention to the Lummis-Gillibrand Responsible Financial Innovation Act, which aims to regulate crypto, the Senator said that there are already ongoing debates in Congress on crypto regulation.
Therefore, the court should dismiss the SEC’s case and leave it up to Congress to develop appropriately balanced regulations, noted Lummis, known for being pro-crypto.
‘The SEC cannot legislate by enforcement’
She wrote that the SEC neither has the power to nor has Congress entrusted it to regulate cryptocurrencies. The brief noted:
“The Constitution empowers Congress—not the SEC—to legislate in such an area of profound economic and political significance.”
She further argued that both Congress and the SEC share an interest in protecting investors. However, she noted that most legislative bills under discussion would rather entrust most oversight of the crypto market to another agency. The brief added:
“Unsatisfied, the SEC seeks to circumvent the political process to commandeer that authority for itself.”
According to Lummis, the SEC has been trying to bring crypto under the definition of ‘investment contract’ through a “novel interpretation” of the words. Congress never allowed the SEC to “reimagine” the definition of securities to expand its influence and authority beyond the one set by Congress.
Therefore, the SEC claiming most cryptocurrencies are securities is just an attempt to grab power, contravening the lawmaking process, the brief noted.
She firmly declared that the SEC “cannot legislate by enforcement,” adding that:
“The SEC’s attempt to shoehorn an entire new class of assets into the existing definition of a “security,” and thereby add to the definition enumerated by Congress, exceeds the SEC’s authority, encroaches on Congress’s lawmaking, and contravenes the separation of powers.”
The separation of powers or the major questions doctrine dictates that only Congress can make laws on major questions of national and economic importance.
To emphasize her perspective, she added that, “Congress has reserved for itself—not the SEC—the fundamental task of determining what type of assets fall within the SEC’s purview, and Congress is the appropriate body to set forth a framework for regulating crypto assets.”
While Congress may grant the SEC the necessary authority to regulate crypto assets, it is a decision for Congress to make and the “SEC cannot usurp the decision for itself,” she wrote.
The SEC is countering ongoing legislative efforts
Through the case against Coinbase, the SEC is trying to gain influence on questions already being debated by Congress, Lummis noted.
Several crypto regulation bills are currently being considered by Congress. Most of these bills have one thing in common — they recommend agencies other than the SEC to regulate the lion’s crypto market share.
Therefore, the SEC’s claim that it has authority over the new sector is “out of step with active legislative efforts,” Lummis noted.
The brief noted:
“While some pending bills may be different, the SEC’s expansive, novel interpretation of its own authority is inconsistent with most of the pending bills.”
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Author: Monika Ghosh
