BakerHostetler Represents The Digital Chamber in Bringing Fresh Perspective to SEC’s Approach to Crypto

The Digital Chamber (TDC), represented by BakerHostetler, filed a noteworthy amicus curiae brief in a case brought by LEJILEX and the Crypto Freedom Alliance of Texas (CFAT) against the U.S. Securities and Exchange Commission (SEC) and certain SEC officials.

LEJILEX intends to launch a crypto exchange, but in light of the SEC's recent jurisdictional overreach and aggressive regulation-through-enforcement regime, lacks the regulatory clarity necessary to ensure its contemplated actions will not violate federal securities laws. The SEC has radically expanded the scope of its jurisdiction to regulate an entire 2 trillion-dollar digital asset industry using only two words from the Securities Act and Exchange Act - "investment contract." Accordingly, in February, LEJILEX and CFAT brought an action against the SEC and certain officials for declaratory and injunctive relief in order to obtain certainty that their actions do not require registration as a securities exchange or broker-dealer.

The amicus curiae brief filed by BakerHostetler on behalf of the TDC is especially significant because of its in-depth historical analysis of the intent and meaning of the federal securities laws, including the definition of an "investment contract," as well as its distinct analysis of the Major Questions Doctrine that focuses on the significance of the regulatory impact, not only the size of the market. The brief explains how the SEC's approach runs counter to the text, history, and original meaning of the statutory term, chafes against the SEC's historical application (and restraint), and short-circuits the legislative process. The brief also analyzes the disagreement regarding which federal agency has jurisdiction over digital assets - the Commodity Futures Trading Commission or the SEC. All of these issues combined are creating regulatory uncertainty and destroying the digital asset industry in the U.S., and forcing blockchain companies to move abroad.

TDC is represented by the BakerHostetler team: Teresa Goody Guillén, Andrew Grossman, Kevin Edgar, Gerald Ferguson, Joanna Wasick, Jonathan Forman, Isabelle Corbett Sterling, Alexandra Trujillo, Christopher Lamb, Ambika Singhal, Devin Haymond, and Nicholas Mowbray.

To read the full brief, click here.