Federal Judge Criticizes SECs Refusal to Address Direct Questions on Bitcoin and Ethereum

CoinDesk reports:
A panel of federal judges in Philadelphia expressed skepticism on Monday over the US Securities and Exchange Commission’s (SEC) long-standing refusal to issue specific rules regarding the sale of cryptocurrency tokens.
During a hearing at the US Third Circuit Court of Appeals in the afternoon, lawyers for Coinbase and the SEC debated whether the regulatory agency should have an obligation to clarify its rules about cryptocurrencies after years of effective operation and sporadic lawsuits against cryptocurrency companies and projects.
The three-judge panel, composed of two Democratic-appointed judges and one Republican-appointed judge, questioned both sides for over an hour, asking about certain boundaries the SEC has in cryptocurrency regulation and whether more information about these decisions should be made public.
In one exchange, several judges seemed puzzled when SEC lawyer Ezekiel Hill refused to clarify on the record whether his agency considers bitcoin and ether as commodities. Hill insisted that such determinations still need to be made on a case-by-case basis.
“You won’t even tell us how the Howey test applies to bitcoin or ether,” Judge Stephanos Bibas scolded Hill, referencing the long-standing framework the SEC uses to determine whether an asset is a security. “These [tokens] have been around for a long time, and you won’t even come out from behind [Coinbase] and say whether it’s safe to trade bitcoin and ether.”
Bibas, appointed to the Third Circuit by former President Donald Trump in 2017, is known for being outspoken about cryptocurrencies. But Judge Thomas Ambro, appointed by former Democratic President Bill Clinton, also appeared skeptical of the SEC’s insistence on not clarifying its rules about cryptocurrencies.
“I don’t see the rationale,” Ambro said of the agency’s refusal to make such rulemaking public. “It’s almost like you’re hitting the [cryptocurrency] platforms in a way that doesn’t really involve them in rulemaking.”
While the SEC has never explicitly stated which cryptocurrency tokens it believes fall under its jurisdiction, the agency did approve bitcoin and ether spot ETFs earlier this year – a milestone move that effectively classified both assets as non-securities as they relate to the US economy.
In his closing remarks, Coinbase’s lawyer Eugene Scalia, son of the late Supreme Court Justice Antonin Scalia, addressed the issue of the SEC’s refusal to clarify the status of tokens that were previously considered not in question.
“When I leave the courtroom, I understand the SEC’s view on this issue even less than when I entered,” Scalia said. “Because I think if there’s one thing that’s clear, it’s that bitcoin and ether have been determined by the SEC to be non-securities. And that’s a problem for the industry, and it’s a problem for the courts.”
“But what this court can do about it,” he added.
Edited by Andrew Hayward.