- Senator Lummis pointed to SEC Chair Gary Gensler’s past acknowledgment that Congress should define digital asset regulations.
- She urged the court to curb the SEC’s expansive regulatory efforts to prevent uncertainty and harm to technological innovation.
Pro-crypto U.S. Senator Cynthia Lummis has filed an amicus curiae brief in the case of Coinbase vs. SEC, pending before the U.S. Court of Appeals for the Second Circuit. In the filing, she challenged the Biden administration’s SEC on its authority to regulate the crypto market.
Senator Cynthia Lummis Fumes Over Coinbase Vs. SEC Case
Lummis criticized the regulatory strategy of the SEC, questioning its overreach by enforcing policies not backed by legislators. She asserted that the SEC has transformed some of the legal standards without communicating with Congress or making the process transparent. These included the Howey Test, which is a standard for determining investment contracts. Lummis stated:
The SEC’s approach under the Biden administration was to aggressively reinterpret case law governing Howey and investment contracts, keep those interpretations secret, and then demand compliance from digital asset exchanges,
She believes it is up to Congress, not the SEC, to establish legal definitions for digital assets. The senator expressed her concerns that the SEC was overreaching in its power over digital assets by applying outdated securities laws to modern financial innovations. She argued that the agency’s broad interpretation of “investment contracts” could classify numerous digital assets as securities, even when they do not fit the original definition established by Congress.
According to Lummis, this regulatory approach is likely to stifle the digital asset industry through uncertainty and imposing restrictions without legislative backing. She pointed to ongoing congressional efforts to establish a structured legal framework for cryptocurrencies and asserted that the SEC’s unilateral actions undermine those efforts.
Cynthia Lummis has been confirmed as the Chair of the Senate Banking Committee’s first-ever crypto-focused subcommittee. The subcommittee will prioritize two key objectives: advancing bipartisan digital asset legislation and ensuring robust oversight of federal financial regulators, as we discussed in the previous update.
Gary Gensler’s Contradictory Statements In Spotlight
Her brief highlighted two concerns: one on separation of powers and one comparing Gensler’s past statements as SEC Chair. In 2021, Gensler admitted that Congress is supposed to be the one to settle digital asset regulation. Lummis used this admission to point out that the SEC acts contrary to the views of its present leadership.
Lummis’ legal intervention is trying to challenge the authority of the SEC in the Coinbase case. She urged the court to put brakes on the agency’s regulatory expansion. She further warned that this could suppress technological advancements and make the regulatory environment full of ambiguity.
The ruling by the court on the case will have far-reaching implications for the oversight of digital assets by the SEC since the agency is embroiled in multiple legal battles across the country. The decision will impact the regulatory landscape and whether the SEC can classify certain digital assets as securities without explicit legislative direction.
Also, it’s important to note that Lummis filed her complaint as Coinbase won a partial legal victory against the SEC. Recently, the U.S. Court of Appeals ruled that the SEC failed to adequately justify its rejection of Coinbase’s petition, marking a setback for the agency. The case remains a key legal battleground in the ongoing debate over crypto regulation in the U.S.
