Regulatory Uncertainty Reiterated! Paradigm Supports Bittrex in Closure: SEC Lacks Cryptocurrency Regulatory Authority

The cryptocurrency venture capital firm Paradigm has submitted a brief in support of the cryptocurrency exchange Bittrex, which is facing a lawsuit from the SEC. Paradigm points out that the SEC is attempting to expand its regulatory authority over the crypto market in a situation where regulations are still unclear, even though it fundamentally lacks the power to do so. It is reported that Paradigm has previously supported Coinbase and claimed that the SEC has failed to establish clear regulations for the crypto industry to follow.

Paradigm Criticizes SEC for "Erroneously" and Improperly Expanding Its Regulatory Authority

The cryptocurrency venture capital firm Paradigm, facing allegations from the SEC against the cryptocurrency exchange Bittrex, submitted a non-party amicus brief to the court today, in a show of support for Bittrex. This marks the first in a series of rapid and consecutive complaints filed by the SEC against centralized exchanges (CEX).

Their legal advisor, Rodrigo Seira, stated on Twitter pointed out:

In a situation where regulations are still unclear, the SEC is attempting to expand its jurisdiction over the cryptocurrency secondary market, a power it does not actually possess.

The main arguments in the brief are as follows:

1. SEC Chairman Gary Gensler acknowledged in 2021 that they lack a specific regulatory framework for overseeing the crypto market. However, in the absence of updated regulations, they now claim to have discovered this authority and are attempting retroactive penalties against relevant companies.
2. The SEC has no authority to regulate the crypto market, as these assets do not involve "investment contracts" and do not fall under the category of securities trading.
3. The SEC's accusations against Bittrex and other CEX are completely different from their basis for token offering cases. While they have regulatory authority over financial transactions in the latter, they do not in the former. In other words, the SEC is attempting to expand its jurisdiction to crypto asset trading.

Previously, in mid-April of this year, the SEC charged Bittrex and its former CEO William Shihara with operating an unregistered securities exchange, just two weeks after announcing their withdrawal from the U.S. market due to regulatory concerns. Subsequently, Bittrex filed for bankruptcy on May 8th, with an estimated over 100,000 creditors and assets totaling nearly $1 billion.

Paradigm Not the First to Support Crypto Companies

In May of this year, Paradigm also submitted a brief to support Coinbase, which was being sued by the SEC. They pointed out that the SEC has an obligation to establish rules related to cryptocurrencies and provide regulatory guidance to companies.

Their firm stance:

Without first issuing practical guidance, Chairman Gensler's repeated admonitions to crypto companies, including cryptocurrency exchanges, about "coming to register" are completely meaningless and impossible to comply with.

It is reported that Coinbase had sent a petition to the SEC as early as July of last year, requesting the establishment of rules related to cryptocurrencies. However, the SEC not only did not respond but also initiated an enforcement investigation against them.

It is evident that two months later, the SEC has yet to formulate or clarify a specific legal framework for the crypto market. However, the lawsuits against the aforementioned companies are still ongoing.

What is Bittrex?

Bittrex is a well-established CEX founded in 2014, known for its variety of tokens, secure, and convenient spot trading. While it was once ranked among the top three exchanges in the world, it has fallen to 57th place in recent years due to market competition.