The recent filing of an amicus brief by a group of law professors and scholars has dealt a significant blow to the U.S. Securities and Exchange Commission’s (SEC) case against Coinbase. This legal document, which provides additional information and perspective to the court, has been described by crypto lawyer James Murphy as “devastating” for the SEC. In this article, we will analyze the key arguments presented in the amicus brief and explore the implications for the SEC’s claim that tokens trading on Coinbase are securities.
The amicus brief begins by tracing the historical development of the term “investment contract” and its interpretation before, during, and after the passage of the federal Securities Act in 1933. According to the brief, state courts had already established a standard definition of an investment contract as a contractual arrangement entitling an investor to a share of the seller’s income, profits, or assets. Importantly, the scholars behind the amicus brief note that no state-court decisions found investment contracts without these key features.
Building upon the precedent set by the Howey decision, the amicus brief emphasizes the existence of a “common thread” in the definition of investment contracts. This thread revolves around the requirement for an investor to be promised an ongoing contractual interest in the income, profits, or assets of the enterprise. Furthermore, the scholars argue that every investment contract identified by the Supreme Court involves a contractual undertaking to grant a surviving stake in the enterprise, a key ingredient that has differentiated investment contracts from other arrangements since the term’s inception.
James Murphy, a prominent crypto lawyer, believes that the amicus brief delivers a fatal blow to the SEC’s claim that tokens trading on Coinbase are securities. By meticulously presenting the historical evolution and legal precedent surrounding investment contracts, the brief effectively challenges the SEC’s argument. Murphy goes as far as to describe the amicus brief as the “coup de grace” that undermines the SEC’s position.
The filing of the amicus brief by a group of respected law professors and scholars has undoubtedly weakened the SEC’s case against Coinbase. By substantiating their arguments with historical context and legal precedent, the scholars have effectively challenged the SEC’s claim that tokens trading on Coinbase should be treated as securities. This development raises questions about the future of cryptocurrency regulation and could potentially influence the outcome of the lawsuit. As the legal battle between Coinbase and the SEC progresses, it will be interesting to see how the court deliberates on the arguments presented in this devastating amicus brief.