Crypto venture capital firm Paradigm accused the Securities and Exchange Commission of "circumventing the rulemaking process" in a brief filed in the agency's ongoing case against Binance.
“Here, the SEC is attempting to leverage the disturbing allegations it levies in its complaint to change the law while circumventing the rulemaking process," Paradigm said in a statement on Friday. "The SEC is plainly acting outside the scope of its authority and we oppose this gambit."
The SEC sued Binance in June over multiple alledged violations of securities laws, including not being registered as an exchange, broker-dealer or a clearing agency. Paradigm noted that Binance was one of many cases the SEC has brought against crypto exchanges recently, and said the SEC's stance "would upend what we know about securities law in several critical ways."
The agency often relies on the Howey Test, born from a 1946 U.S. Supreme Court case involving citrus groves, to help determine whether transactions are investment contracts and thus subject to securities laws.
"There are a whole host of assets that are promoted, bought, and sold for their potential for profit, and yet have been deemed time and again not to be a security per se," Paradigm said in its amicus brief.
Gold, silver and fine art can garner value, but that doesn't mean that selling them constitutes a security, according to Paradigm’s brief.
Circle, the company behind the stablecoin USDC, also weighed in on the SEC's case against Binance this week. Binance has its own stablecoin called Binance USD, or BUSD.
"The SEC's claim that Binance offered and sold its competing stablecoin as an unregistered security raises serious legal questions affecting digital currency and the U.S. economy more broadly," Circle said in its brief.
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