SEC wants retailer’s crypto suit tossed as it’s based on ‘phantom’ policy

A Texas bag shop sued the SEC to obtain legal protection for a token airdrop, but the regulator claims the suit was based on a policy that does not exist. The Securities and Exchange Commission has requested a judge to dismiss a lawsuit filed by an American apparel business seeking to shield itself from potential regulatory punishment over a previous airdrop. On July 3, the SEC filed a motion to dismiss a March 25 lawsuit filed by Beba and the DeFi Education Fund (DEF) requesting that a Waco District Court judge rule that Beba’s self-titled token, which it had distributed, was not a security.

However, the SEC claims the litigation is “premature and premised on a phantom” policy. Beba’s lawsuit claimed that the SEC would declare BEBA tokens to be securities and would sue the company because it “has adopted a de facto rule, without notice or comment, that the ‘vast majority’ of digital assets ‘are securities,'” citing 2022 words from Chair Gary Gensler. In its request to dismiss, the SEC stated that the litigation was “premature and is premised on a phantom—a supposed policy that the Commission never adopted and does not exist.”

Beba and DEF did not provide “a rule, order, or other Commission action that reflects the promulgation of the supposed policy,” according to the SEC. The complaint also omitted to state that regulatory action against Beba was “imminent or threatened” or that the SEC had investigated the company.”In effect, plaintiffs ask this Court to adjudicate the legality of a policy that does not exist and to block potential future enforcement action that may never occur.”

The SEC has sued several crypto businesses for suspected violations of US securities rules, claiming that dozens of cryptocurrencies are unregistered. In their action, Beba and DEF alleged that the regulator violated the Administrative Procedure Act (APA) by avoiding the rulemaking process.  The regulator stated that it has immunity from lawsuits unless it relinquishes that right by an action such as regulation, and the policy alleged by Beba and DEF is insufficient to demonstrate that it waived its immunity by adopting an opinion on cryptocurrency. “The Commission acts through a majority vote of a quorum of its five Commissioners,” according to the SEC. “The statement of a single Commissioner cannot represent the adoption or existence of a Commission policy, and a Comissioner’s speech is not agency action.” We requested comment from the DeFi Education Fund but did not receive a response by the time of publication.

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