Summary:
Federal judges question the SEC's refusal to clarify rules on Bitcoin and Ethereum.
SEC's attorney faced intense scrutiny from the judges regarding crypto regulation.
Judges criticized the SEC for "regulating by enforcement" without clear guidelines.
Eugene Scalia, attorney for Coinbase, expressed confusion over the SEC's position on crypto tokens.
Judges Question SEC's Crypto Regulations
A panel of federal appeals court judges in Philadelphia expressed skepticism towards the U.S. Securities and Exchange Commission (SEC) during a recent hearing. The judges scrutinized the SEC's ongoing refusal to provide specific rules regarding the sale of crypto tokens, particularly focusing on Bitcoin and Ethereum.
During the hearing before the U.S. Court of Appeals for the Third Circuit, lawyers for Coinbase and the SEC debated whether the regulator should clarify its rules after years of "regulating by enforcement" through sporadic lawsuits against crypto firms.
SEC's Lack of Clarity
The three-judge panel, which included both Democrat and Republican appointees, pressed the SEC's attorney, Ezekiel Hill, for over an hour. They were particularly frustrated by Hill's refusal to clarify whether the SEC considers Bitcoin and Ethereum as commodities. Judge Stephanos Bibas challenged Hill, stating, "You won't even tell us how the Howey Test applies to Bitcoin or Ether." This remark highlights the SEC's ambiguity concerning the status of these major cryptocurrencies.
Judge Thomas Ambro also criticized the SEC's unwillingness to publish rulemaking, suggesting that it "almost looks... as if you're going after [crypto] platforms in a way that will crush the industry."
SEC's Inconsistent Approach
Despite the lack of clarity, the SEC has approved spot Bitcoin and Ethereum ETFs earlier this year, which integrated these assets into the American economy and effectively classified them as non-securities. Coinbase’s attorney, Eugene Scalia, expressed his frustration, stating, "I leave this court understanding the SEC’s views on this topic even less than when I entered."
Scalia highlighted the confusion surrounding the SEC's stance, emphasizing that this lack of clarity poses significant challenges for both the industry and the court itself. He concluded with a note of optimism, stating, “This court, though, can do something about it.”
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