Sebastian Sinclair

The US Chamber of Commerce has filed an amicus brief questioning the US Securities and Exchange Commission&#8217;s authority as the agency proceeds with its case against Binance.



The Chamber posits the SEC&#8217;s regulation-by-enforcement approach not only stifles innovation but also prompts market participants to relocate offshore to avoid uncertain regulatory conditions in the US.



As a trade association, the Chamber aims to promote the adoption and use of digital assets and blockchain technology. Based in Washington DC, the organization serves as an advocate for public policy surrounding the asset class and the underlying technology that powers it.



A crucial part of the Chamber&#8217;s argument differentiates between what constitutes an &#8220;asset&#8221; and an &#8220;investment contract.&#8221; It argues that tokens — which can represent a wide array of rights — are not themselves investment contracts.&nbsp;



As such, it argues that platforms trading these tokens shouldn&#8217;t automatically be categorized as securities exchanges. This line of reasoning directly <a href="https://blockworks.co/news/binance-changpeng-zhao-face-sec-charges">challenges one of the SEC&#8217;s core allegations</a> against Binance, which centers on the platform&#8217;s operation as an <a href="https://blockworks.co/news/binance-class-action-lawsuit-market-manipulation">unregistered securities exchange due to its listing</a> of multiple digital assets.



<h2 class="wp-block-heading">Binance allegations</h2>



The <a href="https://blockworks.co/tag/sec">SEC</a> argues the assets traded on <a href="https://blockworks.co/tag/binance">Binance</a> are securities under federal law, whereas Binance maintains they are commodities, putting them outside the SEC&#8217;s jurisdiction.



Additionally, the Chamber&#8217;s brief touches on constitutional issues, arguing that the SEC&#8217;s unilateral, regulation-by-enforcement actions could be at odds with the separation of powers and due process principles.



According to the Chamber, such tactics may exceed the SEC&#8217;s mandate and infringe on constitutional norms that underpin American governance.



“The SEC’s decision nevertheless to consider most digital assets as securities raises grave separation of powers <a href="http://blockworks.co/news/crypto-industry-supreme-court-doctrine">concerns under the Major Questions Doctrine</a> because the SEC is asserting jurisdiction over a major part of the economy that Congress did not intend for it to regulate,” it said.



While the Chamber&#8217;s filing holds no judicial weight, its influence and timing could prove pivotal as the exchange has faced increasing regulatory scrutiny, not only in the US but globally as well.



The arguments laid out in the brief also underscore a <a href="https://blockworks.co/news/gary-gensler-regulation-sec-advice">growing resentment from industry participants</a> that questions <a href="https://blockworks.co/news/sec-regulation-enforcement-comment">the SEC&#8217;s regulatory scope and approach</a>.



In a separate case involving the SEC and <a href="https://blockworks.co/tag/coinbase">Coinbase</a> in August, several similar briefs were submitted in defense of the exchange. 



Like Binance, <a href="https://blockworks.co/news/legal-briefs-coinbase-sec">those briefs argued that the SEC&#8217;s</a> understanding of what constitutes an &#8220;investment contract&#8221; is both fundamentally misguided and at odds with existing legal precedent.&nbsp;



They also further caution that a court decision siding with the regulatory body could have significant and broad ramifications for the cryptocurrency sector.



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US Chamber of Digital Commerce backs Binance in fight against SEC

Casey Wagner

<div id="highlights-block_628cf6f3ac356" class="highlights">
 <ul>
 <li>Crypto executives agree that government agencies need better defined roles when it comes to digital asset regulation</li>
 <li>The SEC needs to define what a digital asset security is, Chamber of Digital Commerce head said</li>
 </ul>
 
</div>



As the digital asset industry continues to evaluate the potential impact of President Biden’s <a href="https://cms.blockworks.co/whos-in-charge-of-what-breaking-down-the-crypto-executive-order/" target="_blank" rel="noreferrer noopener">executive order</a>, one digital asset advocacy group is calling for jurisdictional clarity. 



“It&#8217;s very clear that the US Securities and Exchange Commission is the number one blocker to this industry having economic progress and springing an economic boom in this country that we haven&#8217;t seen in decades,” Perianne Boring, founder and CEO of the <a href="https://digitalchamber.org/" target="_blank" rel="noreferrer noopener">Chamber of Digital Commerce</a>, said at the DC Blockchain Summit in Washington on Tuesday. 



The SEC needs to define what a digital asset security is, for starters, Boring said. The industry cannot continue to innovate without clear guidelines, and investors need safe options for crypto exposure, including a spot bitcoin ETF.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“How do we have futures ETFs but not a spot ETF?” Boring said. “It doesn&#8217;t make sense, and it&#8217;s often harming investors in an incredible way.”</blockquote>



The recent executive order, while somewhat promising in tone, did not provide tangible policy that many institutions and investors are awaiting, Kathy Kraninger, vice president of regulatory affairs at Solidus Labs, said.&nbsp;



“The notion that we&#8217;re going to solve everything for blockchain or for digital assets through this executive order…that&#8217;s a lot of expectation that will be disappointed,” Kraninger said.&nbsp;



The executive order, which Kraninger referred to as more of a fact finding mission, lists several new agencies, like the Environmental Protection Agency, that have not been involved in the digital asset space recently, adding to the jurisdictional confusion.



“I’m not saying that they&#8217;re not going to be useful, but education is an ongoing moving target in the blockchain space,” Sulolit Mukherjee, vice president and global head of tax at Binance, said. “I empathize with the challenges of the folks in these agencies who now have to sort of go out there learn this technology, keep up with the tremendously fast pace of innovation and then come up with recommendations.”&nbsp;



There are current guidelines that asset issuers and exchanges have to follow today, Mukherjee pointed out. Binance.US, as a regulated digital asset exchange, has to follow reporting and licensing requirements, he said. To call crypto an “unregulated industry” is <a href="https://cms.blockworks.co/?s=regulation" target="_blank" rel="noreferrer noopener">a misrepresentation</a>, Boring agreed. 



“It&#8217;s a long game, I think it&#8217;s going to take a while before we get full clarity of what the regulatory framework is going to look like,” Mukherjee said. “The priority now…is responsible innovation.”



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



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