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Senator Lummis Submits Amicus Brief in SEC v. Coinbase Appeal
What happened?
On January 24th, Senator Cynthia Lummis (R-WY) filed an amicus brief in the U.S. Court of Appeals for the Second Circuit, supporting Coinbase in its legal battle against the Securities and Exchange Commission (SEC). Senator Lummis warned that the approach of the SEC thus far has been to “aggressively reinterpret case law governing Howey and investment contracts, keep those interpretations secret, and then demand compliance from digital asset exchanges.” The Senator also stated that the ‘legislation-by-enforcement’ strategy undermines the constitutional separation of powers, emphasizing that "it is the job of Congress to provide a legislative framework that clearly draws the line between a security and a commodity."
The SEC's lawsuit against Coinbase, initiated in June 2023, alleged that the company has been operating as an unregistered securities exchange, broker, and clearing agency. The SEC claimed that since 2019, Coinbase had unlawfully facilitated the buying and selling of crypto asset securities, depriving investors of critical protections. In early 2024, the U.S. District Court for the Southern District of New York denied Coinbase’s Motion for Judgment on the Pleadings, in part, ruling that the SEC had sufficiently pleaded its case and enabling the case against the exchange to proceed. However, after citing DEF’s Amicus Brief in proceedings, Judge Katherine Polk Failla dismissed the SEC’s claim that Coinbase Wallet acted as an unregistered securities broker, ruling that it merely provided technical infrastructure without executing or controlling transactions. Coinbase has now appealed this ruling to the Second Circuit Court of Appeals.
In the amicus brief, Senator Lummis argues that the SEC's enforcement-driven approach creates regulatory uncertainty, which threatens to stifle innovation in the digital asset industry. The Senator calls for Congress to establish a clear regulatory framework for digital assets, stating that "a Second Circuit standard regarding when digital assets qualify as securities is urgently needed."
What does this mean?
Senator Lummis’ amicus brief underscores the industry’s broader concerns about the SEC’s unprecedented regulation-by-enforcement approach to digital assets, and the need for a clear, workable legal framework. Moreover, the brief reinforces the argument that crypto regulation should come from Congress, not through unpredictable enforcement actions. DEF commends Senator Lummis for her efforts to establish regulatory clarity for the industry, and our team is appreciative of the efforts underway at the Congressional level to establish greater legal certainty for digital assets.
Treasury Secretary Bessent Confirmed
What happened?
Last week, the Senate confirmed Scott Bessent to serve as the new Secretary of Treasury. Secretary Bessent is likely to play an instrumental role in developing crypto policy during the new administration.
What does this mean?
Secretary Bessent has been a vocal supporter of blockchain’s potential to modernize financial systems and bring younger generations into markets. Importantly, Secretary Bessent will play a central role in developing a regulatory framework for digital assets as part of a presidential working group established in last week’s Executive Order on “Strengthening American Leadership in Digital Financial Technology.” The Treasury Department’s role in The Working Group includes contributing to a Presidential report recommending regulatory and legislative proposals for digital assets, proposing a federal regulatory framework, exploring a digital asset stockpile, holding public hearings, gathering expert input, and consulting with the National Security Council on national security matters.
Additionally, Secretary Bessent’s Treasury is required to, within 60 days, recommend to the Chair of the working group whether certain digital assets regulations and policies should be rescinded, modified, or formalized into regulations. DEF congratulates Secretary Bessent on his confirmation, and our team is looking forward to being an educational resource on key policy areas for DeFi.
CFTC Digital Asset Roundtables Announced
What happened?
On January 27th, the Commodity Futures Trading Commission announced that, under Acting- Chair Caroline D. Pham, the agency will begin a series of public roundtables to discuss numerous topics, including digital assets. The roundtables will focus on “evolving trends and innovation in market structure” in a way that promotes economic growth and competitiveness. Pham would like the CFTC to “take a forward-looking approach to shifts in market structure,” recognizing that “new technology has created a renaissance in markets that presents new opportunities that are accessible to more people.” The CFTC will work with industry stakeholders over the coming months to gather information and data pertinent to the focus of the roundtables.
What does this mean?
Acting-Chair Pham and the CFTC’s willingness to work with members of the digital assets community signify a shift toward a more welcoming regulatory environment under the new administration. DEF welcomes open dialogue, and looks forward to greater public-private collaboration around new technologies to move the United States forward.
DEF Publishes Blog on DAO’s Legal Landscape
DEF recently published a new blog post written by Policy Intern Henry Michaelson entitled “DAOs in the Crosshairs: Legal Challenges and Emerging Frameworks.”
The blog post investigates Samuels v. Lido DAO, et al., a 2024 court case that raises questions about the legal future of DAOs. The blog post explores the potential implications of this case on DAOs, as well as the regulatory measures taken by many states to remedy the legal ambiguity for DAOs.
DEF Welcomes Chief Communications Officer and Chief of Staff
The DeFi Education Fund (DEF) is thrilled to announce two new team members: Jennifer Rosenthal as Chief Communications Officer and Wade Preston as Chief of Staff. Jennifer will lead the organization’s communications and marketing efforts, and Wade will play a critical role in ensuring DEF achieves our strategic mission by supporting all organizational verticals.
As the policy and legal conversations around DeFi gain fervor over these next few critical years, the DEF team is well-positioned to ensure we are equipped to help policymakers, regulators, and the general public realize the promising future of DeFi.
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