In a recent Twitter thread, Rodrigo Seira, Special Counsel for crypto investment firm Paradigm, voiced his criticism against the U.S. Securities and Exchange Commission (SEC) for its pursuit of crypto exchange Bittrex, accusing the regulator of wrongfully attempting to regulate secondary crypto markets. Seira argued that the SEC’s case should be dismissed as it relies on an unreasonable use of the Howey test to support its claims.
Paradigm filed an amicus brief on July 7, asserting that the SEC had exceeded its jurisdiction. Seira also pointed out that SEC Chair Gary Gensler had previously acknowledged the lack of a proper regulatory framework for crypto exchanges, implying that the regulator lacks the authority to oversee these secondary markets effectively. This viewpoint was also expressed in a blog post by Seira on July 7, where he contended that crypto-assets do not involve “investment contracts” and therefore fall outside the SEC’s purview. He further criticized the SEC for failing to engage in the rulemaking requested by Coinbase, leaving the digital-assets industry in a state of regulatory uncertainty.
The SEC initiated its lawsuit against Bittrex on April 17, marking the first of three consecutive cases brought by the regulator against crypto exchanges. Bittrex subsequently surrendered its Florida money transmitter license on April 30 and later filed for bankruptcy on May 8.
Notably, this is not the first time Paradigm has shown support for a crypto organization facing legal action from the SEC. On May 11, the firm petitioned to file an amicus brief in support of Coinbase, claiming that the SEC had not provided clear rules or guidance for U.S. digital asset firms.
Seira’s criticism raises questions about the extent of the SEC’s authority and jurisdiction in regulating the crypto industry, particularly regarding secondary markets. The ongoing legal challenges faced by Bittrex and Coinbase highlight the need for a comprehensive regulatory framework to ensure clarity and stability in the evolving landscape of cryptocurrency markets.