Gray Reed has recently filed two significant amicus briefs challenging the Securities and Exchange Commission's (SEC) controversial "regulation by enforcement" approach, particularly in emerging technology sectors.
The first brief was filed on behalf of the Texas Blockchain Council and the AI Innovation Association in the ongoing SEC "gag order" case before the 9th Circuit Court of Appeals. This brief supports the New Civil Liberties Alliance's Powell, et al. v. SEC lawsuit, which challenges the SEC's refusal to eliminate or amend its gag rule.
A key excerpt from the Amicus Brief states: "The SEC's history of regulating digital assets is informative. Its regulation in this space has taken place almost completely through enforcement, and risks establishing a dangerous precedent that threatens potentially complementary and overlapping technologies like AI. In fact, the SEC maintains a web page listing its extensive list of digital asset enforcement actions. From this page, one can easily click a link and read about the SEC's version of the enforcement action—and only the SEC's version. The Defendant's version of events is nowhere to be found—because the SEC has silenced the Defendant."
The Amicus Brief was drafted by Gray Reed's Chris Davis and Angela Laughlin Brown. To view a copy, click here.
The second amicus brief was filed on behalf of the Texas Blockchain Council and Investor Choice Advocates Network in the Lejilex, et al. v. SEC, et al. case in the Northern District of Texas. This Brief supports the Plaintiffs' motion for summary judgment and further criticizes the SEC's regulatory approach in the digital asset space.
Key arguments from this Brief include:
- The SEC's ambiguous application of nearly century-old laws to the digital asset industry has had far-reaching and often negative consequences.
- The SEC's "regulation by enforcement" approach prevents necessary discourse between government and industry, particularly in emerging sectors.
- This approach fails to provide clear guidance to industry participants and investors, stifling innovation and growth, as well as investment opportunities.
- The SEC's focus on enforcement while neglecting rulemaking has harmed the industry by failing to offer meaningful and comprehensive guidance.
The Amicus Brief was drafted by Chris Davis and Joshua Smeltzer, both co-chairs of Gray Reed's Blockchain and Digital Assets practice group. To view a copy, click here.
Both briefs underscore the need for clear, well-defined regulations in emerging technology sectors—emphasizing that the current approach not only hinders innovation but also fails to strike a proper balance between investor protection and investor opportunity.
Gray Reed remains committed to addressing critical issues at the intersection of law, technology, and regulation, and navigating complex regulatory landscapes in rapidly evolving industries.
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