Crypto Law Firm Argues SEC Effectively Ruled on Ether in Denying Coinbase Petition
On Wednesday, February 21, 2024, Hodl Law PLLC, a crypto-focused law firm, filed before the U.S. Court of Appeals for the Ninth Circuit arguing that it has legal standing to sue the U.S. Securities and Exchange Commission (SEC) over its crypto policy. The law firm’s argument is based on the SEC’s decision not to take up a rulemaking petition from crypto exchange Coinbase.
Hodl Law is seeking a court order that declares transactions using Ethereum’s native token, ether, as not securities. The law firm claims that the SEC has provided mixed messages regarding the status of ether. To support its claim that the lawsuit is not premature, Hodl Law points to the SEC’s recent denial of Coinbase’s petition for crypto rulemaking and a 2018 speech from an SEC official stating that ether was not a security. According to Hodl Law, these actions by the SEC are final and allow for judicial review.
The law firm’s case was initially dismissed at the district level by a California federal judge who deemed it unripe. The SEC has also pushed back on Hodl Law’s appeal to the Ninth Circuit, arguing that the firm has not identified any harm done or a final decision that can be contested.
However, Hodl Law argues that the SEC effectively made a final decision in December when it informed Coinbase that rulemaking on digital assets was unnecessary at that time. This response was compelled by the Third Circuit after Coinbase requested the court to demand a response. Hodl Law points out that the SEC denied Coinbase’s request to provide insight into the classification of digital assets as securities.
While the SEC contends that final actions require a commission vote, Hodl Law argues that votes are not necessary for judicial review. The law firm claims that the SEC formally rejected a request to identify which crypto tokens it considers securities when responding to the Coinbase petition. Additionally, Hodl Law argues that the SEC publicly affirmed that ether transactions were not securities in a speech by William Hinman, the former director of the agency’s division of corporation finance.
Hodl Law believes that the speech when considered in the context of Coinbase’s request for a regulatory framework, supports its claim that the SEC’s actions are final. The law firm accuses the SEC of attempting to indefinitely postpone judicial review of its policy by refusing to provide answers about ether.
Furthermore, Hodl Law reiterates its arguments that it faces imminent danger due to the SEC’s policies. As active users of the Ethereum Network, the law firm claims that its attorneys could face disciplinary action by the state bar if the SEC were to declare their activities as violating securities laws.
According to Hodl Law, the SEC stated to the Third Circuit that it has no plans to establish rules regarding Ethereum or digital assets in general. Therefore, the law firm believes that the only course of action available is to seek relief in the judicial setting.
Please contact BlockTribune for access to a copy of this filing.
