Paradigm’s Amicus Curiae Briefing Countering the SEC’s Attempt to Expand its Jurisdiction Over Cryptocurrencies

On April 25th, Rodrigo, the legal director of Paradigm, said on Twitter: “Paradigm submitted a amicus curiae briefing in the US SEC’s lawsuit against Terra and Do Kwon. Paradigm is not an investor in Terra, and the briefing we submitted does not support any party’s motion. Our only interest is to counter the SEC’s attempt to continue to expand its jurisdiction over cryptocurrencies.” Rodrigo mentioned: Through enforcement actions against Terra, the SEC attempts to advance an infinite theory that includes stable currency within its jurisdiction, that is, if any instrument can be traded as a so-called “crypto asset security,” then the instrument itself will become a “crypto asset security. Our briefing focuses on responding to the SEC’s new theory that algorithmic stable currency UST is a security. The SEC’s theory of UST is a supplement to the core claims in litigation. Nevertheless, we believe it is crucial that Judge Rakoff, who is responsible for this case, avoid unintentionally supporting this unsupported theory, and that the US Securities and Exchange Commission can seek to widely apply it to other stable currencies

Paradigm: In order to avoid SEC defining stable currency as securities, amicus curiae briefing has been submitted in Terra case

Introduction

On April 25th, Rodrigo, the legal director of Paradigm, took to Twitter to announce that the firm had submitted an amicus curiae briefing in the US SEC’s lawsuit against Terra and Do Kwon. Paradigm explicitly stated that they are not investors in Terra, and their submission does not support any party’s motion. Their only interest is to counter the SEC’s attempt to expand its jurisdiction over cryptocurrencies.

Overview of the SEC’s Lawsuit Against Terra and Do Kwon

In September 2020, the SEC filed a lawsuit against Terra and its founder, Do Kwon, for conducting an unregistered securities offering. The SEC claimed that Terra’s stablecoin, known as UST, was a security. According to the SEC, UST’s algorithmic nature made it an investment contract that meets the definition of a security under the Howey Test.

The SEC’s Attempt to Advance an Infinite Theory

Paradigm’s amicus curiae briefing focuses on the SEC’s attempt to advance an infinite theory that includes stable currencies within its jurisdiction. The SEC’s theory implies that if any instrument can be traded as a so-called “crypto asset security,” then the instrument itself will become a “crypto asset security.” According to Paradigm, the SEC’s theory of UST is a supplement to the core claims in litigation.

Responding to the SEC’s New Theory

Paradigm’s briefing is aimed at responding to the SEC’s new theory that algorithmic stable currency UST is a security. They argue that the SEC’s theory goes beyond the Howey Test and could lead to an overbroad jurisdiction over cryptocurrencies. Paradigm also claims that the SEC’s theory of UST is unsupported and that Judge Rakoff, who is responsible for this case, should avoid inadvertently supporting it.

The Importance of Avoiding Unintended Consequences

Paradigm believes that it is crucial for Judge Rakoff to avoid supporting the SEC’s unsupported theory of UST. They argue that this theory could have far-reaching and unpredictable consequences beyond Terra and UST. Paradigm is concerned that the SEC could use this theory to widely apply it to other stable currencies and expand its jurisdiction over the entire cryptocurrency market.

Conclusion

Paradigm’s amicus curiae briefing is essential in countering the SEC’s attempt to expand its jurisdiction over cryptocurrencies. They believe that the SEC is trying to advance an unsupported theory that could have unintended consequences. Paradigm is urging Judge Rakoff to avoid inadvertently supporting the SEC’s theory of UST, which could have significant implications for stable currencies and the entire cryptocurrency market.

FAQs

**1. What is an amicus curiae briefing?**
An amicus curiae, or “friend of the court,” is a brief filed by an individual or organization that is not a party to the case. The purpose of the brief is to provide the court with additional information, analysis, or perspective that may be useful in deciding the case.
**2. Why does Paradigm care about the SEC’s lawsuit against Terra and Do Kwon?**
Paradigm is concerned about the SEC’s attempt to expand its jurisdiction over cryptocurrencies, which could have far-reaching and unpredictable consequences for the cryptocurrency market as a whole.
**3. What is the Howey Test?**
The Howey Test is a legal test used to determine whether an investment contract constitutes a security. Under the test, an investment contract is a security if it involves an investment of money in a common enterprise, with the expectation of profit primarily from the efforts of others.