An appeals court in the U.S. has supported a ruling by a California federal judge to dismiss an early lawsuit from a Digital currency-focused law firm against the Securities and Exchange Commission.
The law firm filed the court case in an attempt to compel the regulator to explain its classification of Ether.
The Complaints Did Not Prove A Real Risk Of SEC Action For Using Ethereum
In November 2022, Hodl Law filed a complaint against the US watchdog in a district court in San Diego.
The complaints did not show that there was a real risk of the SEC taking action against it for going against securities laws, simply because it utilized the Ethereum network and its token Ether.
The three-judge panel noted in an unpublished opinion,
Hodl Law’s complaint has no allegations that the SEC has inspected, sued, or threatened to inspect or prosecute the law company’s use of Ethereum or Ether.
The company hoped the lawsuit would push the SEC to explain whether it sees ETH as a security after it took action against cryptocurrency firms. It also included many digital currencies under securities laws.
The panel stated that if the SEC decides that transactions that involve Ether or the Ethereum blockchain breach the Securities regulation, Hodl Law would already be breaking the law.
This is because the company is presently conducting such transactions in its legal work.
SEC Aims To Maintain ETH’s Unclassified Status And Avoid Specific Rules
The judges supported the California court’s July 2023 decision to dismiss the case. They said Hodl Law did not prove that the SEC had made a final decision about ETH being a security.
The panel said the SEC has not claimed ETH is a security in its enforcement actions.
They also said the law firm had not shown any rule requiring the SEC to make specific rules or answer private requests about ETH’s legal status.
The senior managing partner at Hodl Law, Fred Rispoli, said in an Aug. 22 X post that the court’s decision was “expected but disappointing.”
He said Hodl Law only wanted the court to let them argue that ETH is not a federal security.
The Ninth Circuit panel said the SEC might never decide if Ether or Ethereum is a “security” under the Securities Act, even though it approved spot ETH ETFs in July. There has not been a decision on ETH and Ethereum assets are securities.
Rispoli disapproved of the panel’s decision, noting that it is not how the rule of law should work in the U.S.
He said Hodl Law still has ways to try to make the SEC answer and stated that the firm is not giving up.
