In an amicus brief alleging the SEC exceeded its authority, Wyoming Senator Cynthia Lummis declared support for the US largest crypto exchange, Coinbase.
Key Highlights
- Senator Cynthia Lumiss files an amicus brief backing Coinbase, alleging SEC’s authority overreach.
- SEC is experiencing leadership changes, with Mark Uyeda as acting chair and Trump nominating Paul Atkins to replace Gary Gensler.
- Senator Lummis heads the digital assets subcommittee and urges that crypto regulation be of national importance.
- Ruling from the Second Circuit Court will influence the course for pending enforcement cases leveled by the SEC.
The ongoing legal tussle pitting the SEC and crypto exchange Coinbase took another twist following Senator Lummis’ entry.
The Republican lawmaker recently declared support for digital assets in the amicus brief that challenges the Securities and Exchange Commission (SEC) enforcement approach.
Senator Lummis Support for Coinbase
The entry of the pro-crypto Senator into the fray coincides with a transitioning period for SEC leadership following the resignation of Gary Gensler on Jan. 20. President Trump appointed Commissioner Mark Uyeda as acting chair as Paul Atkins awaits approval for the role. The entry of the two figures is critical given that their advocacy for digital assets coincidentally, as Congress composition suggests a potential shift in the direction of crypto regulatory.
Lummis confirmed submitting the amicus brief to the Court of Appeals for the Second Circuit to challenge the approach deployed by the SEC to digital assets. This is a multi-year-long battle initiated by the SEC in 2023, claiming Coinbase runs unregistered broker operations, exchange, and clearinghouse services.
Lummis Support for Digital Assets
The Brian Armstrong-led Coinbase disputes these allegations, insisting the traditional securities regulations inadequately address the unique profile of digital assets. Lummis affirms this stance in her filing, arguing that the securities watchdog during Gensler’s tenure overstepped authority. She singles out the agency overreach that emerged by reinterpreting securities laws without the requisite consultation and transparency.
The Wyoming Republican, now tasked with leading the Senate Banking Committee on digital assets, reiterated that Congress and not the regulatory agencies should offer the interpretations. The case is now in the pivotal phase, with Judge Katherine Failla issuing a stay on the proceedings until the Second Circuit Court reviews the matter.
A decision against the Commission will have far-reaching consequences as it could lead to the termination of pending enforcement actions against Binance and Ripple Labs.
Impact of SEC Leadership Changes
The transition in SEC leadership from Gary Gensler to Mark Uyeda as acting chair sparked interest in the digital assets industry. Gensler’s exit on Jan. 20 provided a pivotal moment coinciding with the inauguration of President Donald Trump, who earlier settled on former SEC Commissioner Paul Atkins to oversee the remainder of Gensler’s term that runs through June 2026.
Uyeda began his interim leadership with a significant announcement establishing a crypto-specific task force. The new unit targets developing a practical regulatory framework to eliminate the ambiguity and enforcement-heavy approach that befell the digital assets during Gensler’s tenure.
The legislative landscape is evolving rapidly as Republicans, led by President Trump, gain control over industry regulations. Besides Lummis taking charge of a key subcommittee in the Senate, Representative Bryan Steil now leads the House subcommittee on fintech, AI, and crypto.
Lummis has garnered bipartisan support in cou-authoring bills to eliminate ambiguity in the oversight of regulatory agencies. Alongside Senator (D) Kirsten Gillibrand, Lummis targeted simplifying compliance requirements for the crypto platforms and responsibility divisions for the Commodity Futures Trading Commission (CFTC) and the SEC.
Why This Matter
Lummis’s recent court filing targets resolving the uncertainty from the SEC’s application of the Howey Test to identify securities. The brief challenges the SEC leaning towards dual roles as regulator and enforcer, urging proper separation of powers. The response by the Second Circuit could establish a precedent for digital assets regulation in the US.
This legal challenge coincides with the heightened efforts in Washington to review existing frameworks and formulate legislation specific to digital assets.