Crypto lawyer James Murphy called the amicus brief filed by 6 law scholars to support Coinbase ‘devastating’ for the U.S. Securities and Exchange Commission (SEC). In a post on August 12, Murphy noted that the amicus brief “Absolutely Shreds the SEC’s “investment contract” theory.”
The amicus brief was filed by a group of “law professors and scholars who are experts in securities law and related fields,” as per the filing. It includes UCLA, Boston University, Fordham Law School, University of Chicago, and Yale Law School professors.
An amicus brief is a legal document filed by a non-litigant party who has a strong interest in the case to provide additional information or perspective to the court. The professors filed their brief on August 11, the same day as Senator Lummis, who argued that the SEC cannot legislate by enforcement and encroach on Congress’s lawmaking process.
According to Murphy, who goes by @MetaLawMan online,
“The amicus brief brilliantly traces the history of the meaning of “investment contract” before, during & after passage of the federal Securities Act in 1933.”
Providing a detailed explanation backed by case laws, the amicus brief noted:
“… by 1933, the state courts had converged around a standard for interpreting the term investment contract to mean a contractual arrangement that entitled an investor to a contractual share of the seller’s later income, profits, or assets.”
The scholars added that no state-court decisions found investment contracts without these key features.
They noted that after the Howey decision, there was a “common thread” in how investment contracts were defined. The thread was “that an investor must be promised, by virtue of his or her investment, an ongoing contractual interest in the income, profits, or assets of the enterprise.”
Furthermore, the scholars noted that every ‘investment contract’ identified by the Supreme Court involves a “contractual undertaking to grant a surviving stake in the enterprise.” In fact, the scholars argued that contractual undertaking has been the “key ingredient” that differentiated investment contracts from other arrangements since the term first appeared.
According to Murphy, this amicus brief dealt a deadly blow against the SEC’s claim that tokens trading on Coinbase are securities. He noted:
“In my opinion, this Amicus Brief delivers the coup de grace to the SEC’s argument that crypto tokens trading on secondary markets are investment contracts.”
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