Paradigm, a crypto investment firm, is said to have filed an amicus brief in the SEC’s case against Bittrex. In which the crypto investment firm claims that the regulator is exceeding its authority.
Furthermore, Paradigm has claimed that the action should be dismissed since the SEC has “wrongfully” attempted to regulate crypto secondary markets. They further said that the practice was an excessive expansion of the Howey test.
“The SEC lacks the authority to regulate secondary markets for crypto assets because they do not involve ‘investment contracts’ and are therefore not securities transactions under the agency’s remit,” Paradigm stated in a blog post on Monday.
Rodrigo Seira, Paradigm’s special counsel, has stated that the U.S. The action brought by the Securities and Exchange Commission against Bittrex should be dismissed. This accusation was made today in a series of tweets. In which he referenced the SEC’s accusations of improper use of the Howey test.
Seira also mentioned SEC Chair Gary Gensler’s recent statement that cryptocurrency exchanges need a sufficient regulatory framework. He has also claimed that this admission demonstrates the SEC’s lack of jurisdiction to effectively oversee these secondary marketplaces.
Seira further stated that the digital assets market is in limbo until the SEC implements the rules requested by the well-known bitcoin exchange, Coinbase. He has also said that the industry is in a catch-22 situation, being pushed to register with the SEC but lacking a viable alternative.
Furthermore, it is worth noting that this is not the first time Paradigm has shown support for a crypto organization facing SEC legal action. Furthermore, the investing firm has previously extended its assistance in similar situations.
The ‘Unjust’ Pursuit
The SEC accused Bittrex of running an unlicensed securities exchange, broker, and clearing agency back in April. As a result, Bittrex declared bankruptcy a little over two weeks later.
The SEC recently filed three lawsuits against cryptocurrency exchanges, the first of which was Bittrex. Coinbase and Binance, two of the three, are included and are being investigated by the regulatory body.
Seira tweeted that the SEC’s allegations against Bittrex and other cryptocurrency exchanges “are fundamentally different from its many prior cases against token sellers,” adding that “in those prior cases, the SEC exercised its authority to regulate fundraising schemes under the Howey test.”
It’s important to note that this is the second time Paradigm has funded an exchange that the SEC has taken legal action against. Paradigm filed an amicus brief in May, just after the securities regulator sued Coinbase, arguing that the government had not provided sufficient guidelines for cryptocurrency startups.