Rodrigo Seira, special counsel at crypto investment firm Paradigm, has criticized the US SEC for what he considers an unjustified pursuit of crypto exchange Bittrex in its attempts to regulate secondary crypto markets.
In a Twitter thread on July 11, Seira expressed his thoughts following Paradigm’s amicus brief filing, which argued that the SEC’s case against Bittrex should be dismissed due to an unreasonable application of the Howey test, a legal framework used to determine whether an investment qualifies as a security.
Paradigm filed the amicus brief on July 7, claiming that the SEC had overstepped its jurisdiction in its actions against Bittrex.
Seira highlighted a previous statement by SEC Chair Gary Gensler, where he acknowledged the lack of adequate regulatory frameworks for crypto exchanges. Seira interpreted this as evidence that the SEC lacks the authority to regulate secondary crypto markets effectively.
In a blog post on July 7, Seira reiterated his argument that the SEC lacks authority over crypto-assets because they do not involve “investment contracts.” Consequently, he asserted that crypto-assets should not fall under the agency’s jurisdiction.
Seira emphasized the need for the SEC to engage in the rulemaking process requested by Coinbase, another prominent cryptocurrency exchange, to provide clear regulatory guidelines for the industry.
The SEC initially charged Bittrex in April, alleging that the exchange had operated as an unregistered securities exchange, broker, and clearing agency. Subsequently, Bittrex filed for bankruptcy approximately two weeks after the charges were brought against them.
The latest development marks the second instance in which Paradigm has supported an exchange facing legal action by the SEC. In May, Paradigm submitted a petition to file an amicus brief in support of Coinbase, arguing that the SEC had not provided sufficient rules or guidance for digital asset firms in the US.