The Securities and Exchange Commission (SEC) has asked a judge to toss a lawsuit from an American apparel company that has attempted to shield itself from potential regulatory action over a past airdrop.
On July 3, the SEC filed to dismiss a March 25 suit from Beba and the DeFi Education Fund (DEF) that asked a Waco District Court judge to determine that Beba’s self-titled token it had given away was not a security.
However, the SEC argues the suit is “premature and premised on a phantom” policy.
Beba’s suit claimed the SEC would say BEBA tokens are securities and would sue the business as it “has adopted a de facto rule, without notice or comment, that the ‘vast majority’ of digital assets ‘are securities’” — quoting 2022 remarks from Chair Gary Gensler.
In its motion to dismiss, the SEC said the suit was “premature and is premised on a phantom, a supposed policy that the Commission never adopted and does not actually exist.”
Beba and DEF did not identify “a rule, order or other Commission action that reflects the promulgation of the supposed policy,” the SEC said.
It added the complaint failed to allege 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 multiple crypto companies for alleged breaches of United States securities laws and has claimed that dozens of cryptocurrencies are unregistered securities.
In their lawsuit, Beba and DEF claimed that this was a violation of the Administrative Procedure Act (APA) because the regulator avoided the rulemaking process.
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However, an unwritten policy or the threat of enforcement is not a rule under the APA’s definition, the SEC argued.
The regulator added it has immunity from lawsuits — until it gives up that right through an action such as rulemaking — and the policy alleged by Beba and DEF isn’t enough to prove it waived its immunity by forming a view on crypto.
“The Commission acts through a majority vote of a quorum of its five Commissioners,” the SEC explained. “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.”
Cointelegraph contacted Beba and the DeFi Education Fund for comment but did not receive a response by the time of publication.
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