Cryptocurrency research firm Paradigm has filed an illegal filing in connection with the ongoing court case between the U.S. Securities and Exchange Commission (SEC) and Binance, its U.S. affiliate Binance.US, and the exchange’s global CEO Changpeng “CZ” Chao. Statement of opinions of the parties.
As early as June, the top U.S. securities regulator filed an indictment against the defendants, charging them with 13 counts of operating an unlicensed exchange, broker-dealer, and clearing agency.
In a statement released on September 29, Paradigm, which claimed to have zero interest or investment in the defendants, took a stand against the SEC, accusing the commission of government overreach.
Paradigm says SEC wants to change law
According to Paradigm, the SEC is trying to use “troubling allegations” in its lawsuit against Binance and its co-defendants to bypass the rulemaking process and rewrite the law.
The San Francisco-based research firm backed its claims, first saying that approval of the SEC’s prayer would mean U.S. courts accept the commission’s theory that an “investment contract” does not necessarily require a “contract.”
Paradigm points out that this theory is wrong because case law clearly states that investment contracts require a contractual agreement promising future appreciation in the asset.
In the case of cryptocurrencies, the cryptocurrency research firm said that the SEC cannot provide such an agreement because there is simply no such agreement, especially for tokens sold on the secondary market.
In addition, Paradigm stated that the SEC’s victory against Binance in court will expand the application of U.S. securities laws to all types of assets, including gold, silver and art, that are purchased in anticipation of price appreciation. But it is not considered an investment contract.
Paradigm further emphasizes that a general hope for asset appreciation does not create a common enterprise, which is an essential part of the investment contract. Rather, this optimism simply represents mutual interest, especially when there is no direct connection between the asset issuer and secondary investors, as is the case with many cryptoassets.
Calls for cryptocurrency regulation continue
In its final argument against the SEC, Paradigm called for clear crypto regulations that would give the SEC oversight powers over the crypto space, which is growing in economic and political importance.
The cryptocurrency research firm believes the SEC’s reliance on the Howey test, a 77-year-old legal test, does not provide much-needed clarity in regulating the diverse cryptocurrency industry.
In summary, Paradigm noted that the SEC’s attempt to enforce cryptocurrency regulation through an “unreasonable” interpretation of an “investment contract” based on this legal test failed to satisfy the material question doctrine and therefore required explicit intervention from Congress.
Total crypto market cap valued at $1.055 trillion on the hourly chart | Source: TOTAL chart on Tradingview.com
Featured images from Britannica, charts from Tradingview
