The Texas Blockchain Council (TBC) and Investor Choice Advocates Network (ICAN), represented by Gray Reed Partners Chris Davis and Joshua Smeltzer, filed an amicus brief in the United States District Court for the Western District of Texas supporting the Plaintiffs' opposition to the SEC's motion to dismiss in BEBA LLC and DeFi Education Fund v. SEC (Case No. Case No. 6:24-cv-153-ADA-DTG, before U.S. District Judge Alan D. Albright and U.S. Magistrate Judge Derek T. Gilliland).
The brief argues that the SEC's current regulatory approach to digital assets, which relies almost exclusively on enforcement actions rather than clear rulemaking, is harmful to innovation, market participants and investors alike. This approach has created significant regulatory uncertainty while stifling necessary public debate about appropriate oversight of the emerging digital asset industry.
A key excerpt from the amicus brief states: “The SEC's failure to engage in rulemaking delineating the permissible boundaries of trading in digital assets subjects the cryptocurrency industry, its trading platforms, and investors to unnecessary uncertainty as to what constitutes permissible legal conduct.”
“The SEC's approach of regulating through enforcement actions rather than clear rulemaking threatens to stifle innovation in Texas and across the United States," TBC President Lee Bratcher says. "We need a regulatory framework that protects investors while allowing American entrepreneurs to compete in this rapidly evolving global industry.”
"This regulatory ambiguity particularly impacts smaller market participants and retail investors who lack the resources to navigate unclear regulatory expectations,” Nick Morgan, Founder and President of ICAN, added. “The SEC's approach contradicts its mission to both protect investors and foster capital formation."
Key arguments presented in the amicus brief include:
- The SEC's "regulation by enforcement" strategy prevents meaningful discourse between government and industry stakeholders
- The lack of clear regulatory guidance creates unnecessary uncertainty and risk for market participants
- The SEC's approach effectively transforms it into a merit-based regulator, contrary to Congressional intent
- Critical questions about the SEC's authority and the intersection with other regulatory frameworks remain unaddressed
"The digital asset industry needs clear rules of the road that begin with explicit Congressional authorization and are implemented through a transparent process that allows for stakeholder input,” Chris Davis, lead counsel for the amici and co-chair of Gray Reed’s Blockchain and Digital Assets practice group, stated. “The current approach of regulation through enforcement actions and settlements fails to provide the clarity this emerging industry requires and runs counter to the SEC’s mission of protecting investors while fostering capital formation."
For a copy of the amicus brief, click here.