Blockchain Association Backs Telegram Against SEC Allegation
It’s the second industry’s motion in as many days to support Telegram’s fight against the SEC allegation. It disrupted U.S. securities law by trading future tokens (called grams) for its TON blockchain to authorized investors in the U.S.
The Chamber of Digital Commerce on Tuesday filed its amicus brief, helping Telegram’s claim that “digital assets may be the subject of an investment contract without being security.” The Chamber, nevertheless, did not explicitly request the Court to take either side in this case.
The Blockchain Association’s brief strikes a more serious note, explaining Telegram made adequate attempts to join the SEC’s criteria, appending that the regulator’s court action could harm both Telegram’s investors and the market in common.
“The Court should not block a long-planned, highly anticipated product launch by interfering with a contract between sophisticated private parties. Doing so would needlessly harm the investors that securities laws were designed to protect,” the association states in its brief.
Reciprocating long-held concerns that blockchain and cryptocurrency companies have not obtained clear and unambiguous direction from the SEC for years, the brief discusses the agency’s lawsuit against Telegram makes the circumstances even grayer:
“The SEC’s lawsuit also raises novel questions regarding whether companies are forbidden from raising funds from sophisticated U.S. investors, under well-established regulatory provisions, to build blockchain networks.”
The advocacy group mentions other cases of blockchain startups favorably communicating with the regulator, viz TurnKey Jet, and Pocketful of Quarters, which both achieved no-action letters from the SEC. Kik is also mentioned, a firm still wishing for a court trial on its popular case.
“Engaging with the SEC is extremely expensive” and doesn’t significantly save businesses from future actions, the brief explains.
“Telegram discussed its plans with SEC staff for a year and a half, provided copious information, and responded to limited feedback by adjusting the design of its transaction. Yet, in the end, the SEC has sued, and the SEC’s briefs thus far say nothing about the substance of those discussions,” the association states.
Compelling Telegram to abort the launch of TON and the token issuance will eventually hurt both innovators and investors who financed in grams. The brief continues: “It would frustrate the investors’ aims in entering into the Purchase Agreement, and would frustrate innovation by delaying the network launch.”
The agreement concludes by urging the Court to “reject the SEC’s arguments that the not-yet-in-existence Grams were securities at the time of the Purchase Agreements.”
The first court hearing for the case is listed for February 18.