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Cryptocurrency attorney James Murphy has described the amicus brief submitted by six legal scholars in support of Coinbase as highly impactful for the U.S. Securities and Exchange Commission (SEC). In a statement on August 12, Murphy emphasized that the amicus brief effectively dismantles the SEC’s “investment contract” theory.
The filing outlined that a consortium of legal academics and experts specializing in securities law and related disciplines submitted the amicus brief. The group comprises professors from prominent institutions including UCLA, Boston University, Fordham Law School, University of Chicago, and Yale Law School.
The professors lodged their brief on August 11, coinciding with Senator Lummis, who contended that the SEC lacks the authority to establish regulations through enforcement, thereby infringing upon the legislative prerogative of Congress.
An amicus brief serves as a legal document submitted by an external party not directly involved in the litigation but possessing a significant stake in the matter. Its purpose is to supply supplementary information or viewpoints to the court.
The amicus brief, supported by case laws, provided a comprehensive explanation, stating that in 1933, the state courts had unanimously adopted a criterion for interpreting the term ‘investment contract’ to signify a contractual arrangement granting investors a contractual share of the seller’s future income, profits, or assets.
Murphy stated, “The amicus brief skillfully follows the evolution of the definition of the term ‘investment contract’ prior to, during, and subsequent to the enactment of the federal Securities Act in 1933.”
The scholars emphasized that no state-court rulings identified investment contracts lacking these crucial attributes. They highlighted that following the Howey decision, a consistent pattern emerged in the definition of investment contracts. This pattern indicated that “an investor must be assured, due to their investment, a continuous contractual stake in the enterprise’s income, profits, or assets.”
Additionally, the scholars pointed out that each instance of an ‘investment contract’ recognized by the Supreme Court encompasses a “commitment to provide an enduring stake in the enterprise.”
They further contended that this commitment has remained the “essential element” distinguishing investment contracts from other agreements since the inception of the term.
As per Murphy’s assessment, this amicus brief dealt a severe blow to the SEC’s assertion that tokens traded on Coinbase qualify as securities. He remarked, “In my view, this Amicus Brief effectively delivers the final blow to the SEC’s contention that cryptocurrency tokens traded on secondary markets should be considered investment contracts.”
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
