The Chamber of Digital Commerce has chimed in on the current legal tussle between the United States Securities and Exchange Commission (SEC) and mobile messaging giant Telegram, as the legal battle raging between both entities continues to brew into 2020.
If you recall, Telegram has been on the fast track towards launching a digital asset- the GRAM token. The firm launched an Initial Coin Offering (ICO) for the token some years back, where it raised a total of $1.7 billion from two token offerings for the GRAM and the Telegram Open Network (TON)- its blockchain platform.
Telegram had planned to launch the asset by late October 2019, but the SEC had other plans and subsequently sued the London-based tech giant for selling a security without registering with it or getting an exemption- effectively running afoul of the Securities Act of 1933.
Telegram Didn’t Break Any Laws
Over the past four months, the legal tussle has involved back and forth filings between both entities, with Telegram maintaining that its asset isn’t a security, and the SEC is simply conducting an unfounded investigation.
The Digital Commerce Chamber weighed in yesterday, pointing out in an amicus brief filed by Lilya Tessler- a partner Sidley Austin, the chamber’s New York-based counsel- that the GRAM tokens aren’t entirely securities.
The Chamber primarily functions as an advocacy group that fights for the rights of companies in the blockchain and digital asset space, as well as the improved adoption of digital assets. In its filing, it attempted to give pointers to the U.S. District Court for the Southern District of New York on how it should consider digital assets- and, by extension, rule on the case at hand.
Amongst other things, it argued that while it wasn’t looking to prove that Telegram’s ICO wasn’t a securities transaction, it would like to ensure that there’s enough regulatory clarity surrounding the digital asset space.
Advocating for Clearer Laws Going Forward
The advocacy group also urged the court to mark a distinction between digital assets, which it termed as the subject of an investment contract, and the securities transaction that comes with it. To do this effectively, the association recommends two different analyses- including whether a securities transaction includes an investment contract and whether the subject of such a contract is a commodity that can also be sold in a commercial transaction.
In addition, the group noted that while digital assets should be given full protection under securities laws, most of the disclosures required by these laws don’t matter much concerning commercial transactions conducted with the assets themselves. It pointed out that not all transactions conducted with digital assets require securities law protections, noting that there are other regulators in the United States apart from the SEC. So, the court should be able to consider multiple regulatory regimes while making its decision on the case.
In summary, the group explained that not every digital asset is a security just because it is based on blockchain technology. In this case, the GRAM doesn’t entirely fit into the “security” moniker.