TLDR
- Senator Cynthia Lummis filed an amicus brief supporting Coinbase against the SEC, arguing the agency exceeded its authority
- The SEC’s lawsuit against Coinbase from 2023 alleged unregistered broker, exchange, and clearinghouse operations
- Leadership changes at SEC include Acting Chair Mark Uyeda and nominee Paul Atkins replacing Gary Gensler
- Lummis now chairs the Senate’s digital assets subcommittee and calls crypto regulation “a matter of national importance”
- The Second Circuit Court ruling could affect multiple pending SEC crypto enforcement cases
The ongoing legal confrontation between the Securities and Exchange Commission (SEC) and cryptocurrency exchange Coinbase has taken a new turn with Wyoming Senator Cynthia Lummis stepping into the fray.
Lummis filed an amicus brief with the US Court of Appeals for the Second Circuit, challenging the SEC’s regulatory approach to digital assets.
The SEC initiated legal action against Coinbase in 2023, claiming the company operated as an unregistered broker, exchange, and clearinghouse. Coinbase has contested these allegations, maintaining that traditional securities regulations don’t adequately address the unique nature of digital assets.
In her filing, Lummis argued that the SEC under former Chair Gary Gensler overstepped its authority by reinterpreting securities laws without proper transparency or consultation. The Wyoming Republican, who now leads the Senate Banking Committee’s digital assets panel, emphasized that such interpretations should come from Congress rather than regulatory agencies.
The case has reached a pivotal moment with Judge Katherine Failla ordering a stay on the SEC’s proceedings until the Second Circuit Court can review the matter. This decision could have far-reaching effects on other pending SEC enforcement actions, including cases against Ripple Labs and Binance.
Recent changes in SEC leadership have sparked interest across the cryptocurrency industry. Gary Gensler’s departure on January 20, 2025, led to Mark Uyeda stepping in as Acting Chair. President Trump has nominated former SEC Commissioner Paul Atkins to complete Gensler’s term, which runs through June 2026.
Under Uyeda’s interim leadership, the SEC has announced the formation of a dedicated cryptocurrency task force. This new group aims to develop a more practical regulatory framework for digital assets, potentially marking a shift from the agency’s previous enforcement-heavy approach.
The legislative landscape has also evolved with Republicans gaining control of the Senate. This change resulted in Senator Lummis taking charge of the chamber’s subcommittee on digital assets, while Representative Bryan Steil now heads the House subcommittee on crypto, fintech and AI.
Lummis has previously collaborated across party lines, co-authoring legislation with Democratic Senator Kirsten Gillibrand. Their bill proposes clearer divisions of responsibility between the SEC and the Commodity Futures Trading Commission (CFTC) while simplifying compliance requirements for cryptocurrency platforms.
Howey Test
In her recent court filing, Lummis criticized the SEC’s application of the Howey Test, the traditional framework for identifying securities. She argued that this approach has created unnecessary uncertainty for businesses and consumers in the digital asset space.
The Senator’s brief specifically challenges the SEC’s dual role as both regulator and enforcer. “The SEC cannot act as both lawmaker and enforcer,” Lummis stated in her filing, emphasizing the need to maintain proper separation of powers.
The timing of this legal challenge coincides with broader changes in Washington’s approach to cryptocurrency regulation. The new Republican majority in Congress has signaled its intent to review existing regulatory frameworks and potentially introduce new legislation specifically designed for digital assets.
Industry observers are closely watching the Second Circuit’s response to this appeal, as it could establish new precedents for how digital assets are regulated under US law.
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