James “MetaLawMan” Murphy, a well-known legal professional and supporter for intellectual property, has expressed his thoughts on the current developments in the legal battle between the SEC and cryptocurrency exchange giant Coinbase. The acrimonious debate over the classification of crypto tokens has reached a turning point, according to a persuasive amicus brief filed by six prominent securities law students.
Authorized students from prestigious institutions such as Yale, the College of Chicago, UCLA, Fordham, Boston College, and Widener have written a strong amicus brief. This brief deconstructs the SEC’s “funding contract” argument and deftly tracks the historical history of the term, examining its meaning both before and after the passage of the federal Securities Act.
The students’ evaluation results in three firm findings. For starters, by 1933, state courts had settled on a definition of a “funding contract” as a contractual agreement entitling customers to a proportionate share of the vendor’s succeeding earnings, revenue, or property. Second, since the historic Howey decision in 1946, there has been a consistent thread connecting funding contracts – an investor’s involvement necessitates a permanent contractual claim on the enterprise’s earnings, income, or property.
Finally, the Supreme Court’s designation of each “funding contract” is invariably based on a contractual commitment that ensures a long-term ownership in the firm.
Murphy warmly supports this amicus brief, claiming that it will likely be the decisive blow to the SEC’s contention that crypto tokens sold on secondary markets fundamentally reflect funding contracts. With this well-crafted legal argument, Coinbase appears to be making important progress toward victory in its current legal battle with the SEC.
