Investor Choice Advocates Network (ICAN), a nonprofit public interest litigation organization, filed an amicus brief with the U.S. District Court of Washington, D.C., asking the Court to dismiss the U.S. Securities and Exchange Commission's (SEC) lawsuit against Binance, the largest crypto exchange in the world. ICAN cited the SEC's attempt to extend its jurisdiction outside of the U.S. and its "ambiguous" application of securities laws as reasons the lawsuit against the crypto giant should be dismissed.
In its statement of interest, ICAN stated that it advocates for expanded market access for underrepresented investors, and in the interest of those market participants, ICAN seeks to ensure that the SEC does not "improperly hamper" investors' ability to engage in digital asset transactions, according to a copy of the amicus brief. ICAN said that the ways in which the SEC is interpreting and attempting to apply the Securities Act of 1933 and the Securities Exchange Act of 1934 to the digital asset ecosystem threatens to negatively impact opportunities for investors.
In the brief, ICAN said that the SEC's approach to regulating digital assets is lagging behind technological advancements like blockchain technology, which allow investors to participate in foreign markets. ICAN asserted that American investors should be free to participate in those markets, but foreign markets may shut out Americans to avoid triggering U.S. securities laws. ICAN goes on to note that some foreign regulators do not consider digital assets to be securities, so attempting to impose the SEC's position on foreign digital asset transactions could lead to "an unworkable web of compliance requirements," according to the brief.
ICAN expressed disagreement with the SEC's application of the Howey test to digital assets, arguing that profits gained from digital assets are the result of market fluctuations, not a third party's efforts, according to the brief. ICAN also dismissed the SEC's argument that the "deflationary" quality of some digital assets makes them an "investment contract," because their deflationary nature is inherent to the assets' programming and "burning" happens automatically, not through the efforts of others.
According to the brief, ICAN accused the SEC of attempting to regulate the digital asset industry through "piecemeal litigation" rather than through Congressionally granted authority or through official rulemaking. ICAN has asked the court to dismiss the lawsuit.
Federal Newswire reported that Binance and Changpeng Zhao (CZ), the exchange's CEO and founder, filed a motion to dismiss the SEC's lawsuit on Sept. 21, arguing that Congress needs to legislate regulations for digital assets before the SEC can claim authority over crypto, according to a copy of the motion. The motion argued that the claims against Binance and CZ should be dismissed because the SEC fails to provide a credible claim that any of the cryptocurrencies in question can be reasonably asserted as a security, while the other charges are "impermissibly extraterritorial" or violate the fair-notice doctrine.