The Securities and Exchange Commission (SEC) has requested that a judge dismiss a lawsuit filed by an American apparel company seeking to protect itself from potential regulatory action related to a past airdrop.
On July 3, the SEC submitted a motion to dismiss a lawsuit initiated on March 25 by Beba and the DeFi Education Fund (DEF). This legal action, presented to a Waco District Court judge, sought a declaration that Beba’s self-named token, which had been distributed for free, should not be classified as a security.
The SEC contends that the lawsuit is “premature and based on a fictitious” policy. Beba’s legal claim argued that the SEC might consider BEBA tokens as securities and take legal action against the company, asserting that the SEC had effectively established a de facto rule—without formal notice or public commentary—that “the ‘vast majority’ of digital assets are considered securities.” This assertion was based on statements made by SEC Chair Gary Gensler in 2022.
In its dismissal motion, the SEC argues that the case is “premature and founded on a phantom—a non-existent policy that the Commission has never adopted.” The SEC further contends that Beba and DEF have failed to identify any official rule, order, or Commission action that embodies the purported policy.
An excerpt from the SEC’s dismissal motion discussing Beba and DEF’s allegations. Source: PACER
The SEC also pointed out that the lawsuit did not establish that regulatory action against Beba was “imminent or threatened” nor did it demonstrate that the SEC had conducted an investigation into the company. The SEC has previously taken legal action against various crypto companies for alleged violations of U.S. securities laws and has categorized numerous cryptocurrencies as unregistered securities.
Beba and DEF’s lawsuit accused the SEC of violating the Administrative Procedure Act (APA) by bypassing the formal rulemaking process. However, the SEC counters that an informal or speculative policy does not constitute a rule under the APA’s definition.
Additionally, the SEC argued that it is protected from lawsuits unless it voluntarily waives this immunity through actions like formal rulemaking. The alleged policy mentioned by Beba and DEF does not suffice to demonstrate that the SEC has relinquished its immunity or that it has formed a definitive stance on cryptocurrency.
“The Commission operates through a majority vote among its five Commissioners,” the SEC stated. “The comments of a single Commissioner do not represent the adoption of Commission policy, nor do individual speeches equate to agency action.”
Cointelegraph reached out to Beba and the DeFi Education Fund for a statement but did not receive a response before publication.
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