The latest report revealed that there had been some new development in the ongoing legal case that the United States Securities and Exchange Commission filed against Coinbase Exchange. Six securities lawyers representing major law institutes filed for a joint amicus brief to support the defendant against the commission.
According to the report, the SEC filed a court case against Coinbase Exchange in June, accusing it of violating securities rules by providing customers with a lending scheme tagged Lend. In the report, the SEC claimed that Lend was a program that enabled users to get rewards on their digital assets.
However, Coinbase exchange refuted the charges, claiming that the Lend program was not a security; instead, it was an ordinary project with no contractual agreements or duties.
Meanehile, over the weekend, some crypto lawyers remarked on the ongoing Coinbase Vs. the SEC court case, stating that there are some critical developments that the judge needs to consider while ruling the case. In addition, the six attorneys expressed their strong support for the Coinbase exchange.
Furthermore, the report revealed that the securities law professors hailed from six major law institutes in the United States, which included Yale, UCLA, the University of Chicago, Widener, Fordham, and Boston University.
The Six Layers Jointly Presented An Amicus Brief
They reportedly submitted an amicus brief to the presiding court, claiming that the SEC depends on its lawsuit against Coinbase on a flawed investment contract theory conflicting with the term’s legal context on Friday.
Furthermore, the lawyers’ summary revealed that the term Investment contract has its historical background as far back as 1933, when the Securities Act was first adopted, where it was defined as a contractual arrangement that gives an investor the right to a portion of the subsequent profits, assets, and income the seller makes.
Also, the summary stated that the SEC’s Securities Act heavily depends on the principle invented by WJ Howey Co. in 1946 to determine whether an asset is a security or not. According to Howey’s test, a security asset usually has four significant attributes, which include, one, money investment; two, a mutual venture; three, there is a fair expectation of gains; and finally, profit from the others’ efforts.
Furthermore, the summary pointed out that the Howey test does not in any form adulterate the meaning of investment contracts; rather, it helps to identify whether it applies to new inventions.
The six securities law professors pointed out in their summary that the common modus operandi of investment contracts is that sellers would promise customers that they would receive a portion of the subsequent profits they make from a particular investment contract if they invest in it.
Lend Does Not March Howey’s Description Of Securities; Lawyers
But on the contrary, the definition which investment contracts stands for does not match the modus operandi of the Lend project operated by Coinbase exchange, according to the lawyers’ argument. They claimed that Lend is a simple project that enables users to lend out their digital assets to the exchange for a particular time in exchange for incentives at a fixed interest rate.
Meanwhile, crypto enthusiasts remarked on the new development, stating the lawyers’ decision to file an amicus brief is a huge blow to the commission’s lawsuit. A cryptocurrency lawyer, Bill Morgan commented on X (Twitter), claiming that the development was a huge improvement in the case.
Lawyer Morgan pointed out that the six lawyers’ arguments suggest that the determination against Ripple Labs displayed in Torres’ ruling may be inaccurate. He added that if the six security law professors were correct with their assertions, then the judgment of Torres A. was wrong.
In his comments, lawyer Morgan referenced another court case the SEC filed against Ripple Labs, the issuer of the XRP token. Judge Analisa Torres, who presided over the case, ruled in favor of Ripple, ruling that when traded on a third-party platform, XRP is not a security. But, the judge claimed that the XRP tokens that Ripple sold were securities.