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September 30, 2023 by Mishal Ali
Paradigm, a prominent investment firm, has submitted an amicus brief in favor of Binance, in which they critique the U.S. Securities and Exchange Commission (SEC) for overstepping its regulatory authority.
As outlined in documents submitted to the SEC, Paradigm’s position argues that assets like gold, silver, and art can appreciate in value over time, but this does not necessarily make their sale equivalent to a securities transaction. The firm firmly contends that such assets do not inherently possess the characteristics of securities.
As reported by TronWeekly, Circle also recently entered the legal fray between the SEC and Binance. Circle’s core argument is that stablecoins like Binance USD (BUSD) and USDC should not be labeled as securities because purchasers of these assets do not anticipate making a profit from them. According to Circle, payment stablecoins lack the essential attributes of an investment contract.
Paradigm’s Strong Stance in the Binance SEC Lawsuit
Paradigm’s official statement, released on September 29th, clearly states that the company has no financial stake in Binance and is not an investor in the exchange. Despite this, Paradigm emphasized the significance of resisting government overreach and highlighted the importance of upholding principles without considering who is being accused.
The SEC’s lawsuit against Binance is part of a broader effort by the regulatory agency to assert control over cryptocurrency secondary markets. This move has prompted criticism from various quarters.
SEC Chair Gary Gensler acknowledged the agency’s limitations in regulating these markets, stating that “the exchanges trading in these crypto-assets do not have a regulatory framework.”
Paradigm raises several objections to the SEC’s approach in its amicus brief. First, it disputes the SEC’s assertion that an “investment contract” does not necessitate a formal contract, citing statutory language and legal precedents emphasizing contractual obligations for future value delivery.
Paradigm raises two key arguments against the SEC’s theory. Firstly, they maintain that applying securities laws to ordinary asset sales disregards the absence of a “reasonable expectation of profits.” Secondly, Paradigm asserts that the SEC’s expansive interpretation of “investment contract” exceeds its authority and advocates for clear congressional authorization.
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