Chamber of Digital Commerce: SEC Actions 'Pose Separation of Powers and Due Process Concerns'

Chamber of Digital Commerce Slams SEC Posture in Kraken Amicus Document

The Chamber of Digital Commerce has filed an amicus curiae document supporting Kraken, a U.S.-based cryptocurrency exchange, in its legal battle against the U.S. Securities and Exchange Commission (SEC). The group, which promotes the acceptance and use of digital assets and blockchain-based technologies, argued that the SEC’s actions are wrong on two different points and that its posture stifles innovation, potentially impeding the development of a healthy cryptocurrency industry as part of the U.S. economy.

Contrary to what the SEC’s expanded definition of “investment contract” seeks to establish, the Chamber of Commerce explains that “digital assets are certainly not securities,” establishing that per se these are only lines of computer code. Citing different jurisprudence, it stresses that there is regulation supporting this affirmation and that the notion to identify if a transaction or scheme is an “investment contract” must be assessed on a case-by-case basis.

Also, the amicus curiae states that, due to its importance in the U.S. economy, cryptocurrency regulation should be subject to the “major questions doctrine,” which determines that Congress retains authority over an agency if a case is “extraordinary” and embodies “economic and political significance.” The chamber sustains that blockchain would fall under this doctrine due to its extension and economic significance.

This suggests that the SEC should follow Congress’ leadership on the issue, and stop its regulation by enforcement policies over this widespread industry. Coinbase, another U.S. cryptocurrency exchange facing the SEC in courts, has previously argued that the major questions doctrine should apply to the cryptocurrency industry, depriving the SEC of any authority over the issue until Congress establishes clear regulations.

Finally, the chamber sustains that, even if the major questions doctrine does not apply to crypto-as-securities regulation, the SEC has failed to provide fair notice with its regulation-by-enforcement approach, not giving clarity or offering procedures for actors in the industry to determine whether an asset constitutes a security or not.

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