Winston & Strawn and Chamber of Digital Commerce File Amicus Brief in SEC v. Wahi

On February 22, Winston & Strawn and the Chamber of Digital Commerce filed an amicus brief seeking to dismiss a case brought by the U.S. Securities and Exchange Commission against former Coinbase employees accused of insider trading, arguing the case unfairly labeled the digital assets as securities. 

In July, the SEC brought charges against Ishan Wahi, Nikhil Wahi, and Sameer Ramani in which they were accused of purchasing and selling at least 25 crypto assets for profit, nine of which were identified as securities by the SEC for the first time as part of that lawsuit. The Chamber of Digital Commerce contends that, as a result, the case is a “backdoor” attempt to expand its jurisdiction over a growing array of digital assets transactions by labeling them as “securities” instead of waiting for clarity from Congress or putting rules and guidance into effect for the digital asset industry. 

“It’s in these types of situations where I think optimally, because you have an intra-governmental battle, you have Congress sort out the regulatory morass or at a minimum, have a ordinary notice and comment process,” Partner and Co-Chair of the Digital Assets and Blockchain Technology Group Daniel Stabile said in an interview with Reuters. 

If the court were to rule in the SEC’s favor, digital asset exchanges that offer the tokens that have been labeled as securities could face state and federal regulatory action as well as private litigation.

“If the court were to accept the SEC’s position, it would embolden the SEC to continue utilizing this tactic, which would present more and more creators of digital assets with a Hobson’s choice: leave their fates in the hands of accused insider traders, who might not have the resources, information or incentives to push back on the SEC’s attempt to expand its jurisdiction, or intervene as a defendant in the action, thus potentially incurring massive legal expenses, reputational risk and the threat of additional litigation. Under either scenario, the digital assets marketplace—and the United States’ role at the forefront of blockchain technology—will suffer,” said George Mastoris, a litigation partner at Winston & Strawn who, along with Daniel, co-led the effort on behalf of the Chamber.

The Winston team consisted of Daniel Stabile, George Mastoris, Thania Charmani, Jeffrey Steinfeld, Kerry Donovan, Matt Olsen, Michelle Tuma, Gabie Plasencia, Jeremy Chu, Uriel Lee, and Jara Jacobson.

The amicus brief filing has been covered by the following news outlets, among others: 

• “Trade group argues U.S. SEC case unfairly labels crypto as securities,” Reuters
• “SEC Is Using 'Back Door' To Crypto Regulation, Says Group,” Law360
• “Winston & Strawn Attorneys Back Digital Asset Association in Civil Crypto Fight,” The National Law Journal
• “Trade Group Argues U.S. SEC Case Unfairly Labels Crypto as Securities,” U.S. News & World Report
• “SEC accused of attempting to enact crypto regulations via the back door,” Cryptopolitan
• “Crypto Trade Group Files Brief Urging Court to Dismiss Coinbase Insider Trading Case,” Decrypt

• “Breaking: Crypto Body Takes Action Against US SEC Chair Gary Gensler For Crypto Crackdown,” CoinGape

Read the full brief.