While the SEC is trying to pursue a legal suit against Binance and Coinbase, Congress is taking a pro-crypto stance. Earlier this week, the US Securities Exchange Commission (SEC) chairman, Gary Gensler, fielded multiple questions raised by Democrats in the House committee hearing. Gensler faced vigorous questions by the members of Congress from both sides of the political spectrum. Ritchie Torres, a congressman from The Bronx, sought clarity regarding the ‘investment contract’ and which financial institutions fall under the scope of SEC.
It was observed that not only the crypto market is in doubt about the leadership of the chair Gary Gensler, but also Paradigm, crypto venture capital, accused the SEC of the case against Binance and filed an amicus brief. Paradigm stated that the SEC is attempting to leverage the disturbing allegations it levies in its complaint to change the law while circumventing the rulemaking process.
During the exchange, Torres brought up the topic of whether an investment contract requires an actual contract, pointing out the landmark SEC v. Howey case. The series of questions raised by Torres echoed the concern of many crypto enthusiasts that the word “investment contract” has been interpreted too broadly that anything Gensler considers as security is deemed under SEC.
Gensler was not able to provide a clear answer to Torres’s question of whether an investment contract requires any form of contract to be considered a security. Torres argued that Gensler cannot cite a case in which the actual contract is lacking. He remarked,
I worry that when it comes to crypto, your interpretation of the term’ investment contract’ has no limiting principle and, therefore, is susceptible to arbitrary and capricious enforcement actions.
According to people familiar with Coinbase’s efforts in Washington, D.C., the company is actively seeking the support of influential House members, such as ranking member of the House Financial Services Committee Maxine Waters. Torres’s opposition to Gensler is a reflection of Coinbase’s increasing influential status among House Democrats.
