US Senator Cynthia Lummis has recently stepped in to support Coinbase in its legal battle against the Securities and Exchange Commission (SEC). In her amicus brief filed with the US Court of Appeals for the Second Circuit, the Wyoming Republican criticized the SEC’s regulatory strategy as a violation of constitutional principles.
Lummis accused the SEC, under former Chair Gary Gensler, of reinterpreting securities laws without transparency or consultation, which she believes undermines congressional oversight. She stated that the agency’s tactics disregard the separation of powers outlined in the Constitution and hinder the innovation and growth of digital assets.
The SEC had initiated a lawsuit against Coinbase in 2023, alleging that the exchange operated as an unregistered broker, exchange, and clearinghouse. However, Coinbase has contested these claims, arguing that the SEC’s regulations do not align with the unique characteristics of digital assets.
The case has significant implications for how cryptocurrencies are governed under US law. Lummis’ brief highlights the SEC’s inconsistent application of the Howey Test, a legal framework for defining securities, which has created regulatory uncertainty for businesses and consumers. She believes that such interpretations should be the responsibility of Congress to ensure a balance between innovation and consumer protection.
As the SEC undergoes leadership changes under the Trump administration, Acting Chair Mark Uyeda has signaled a shift in priorities. Uyeda recently announced the formation of a crypto task force to develop a more pragmatic regulatory framework, raising optimism among crypto advocates for a less adversarial stance from the agency.
Lummis, who now leads the Senate Banking Committee’s digital assets panel, has been a strong advocate for bipartisan efforts to clarify regulatory oversight for crypto. She collaborated with Senator Kirsten Gillibrand on legislation proposing a clearer division of responsibilities between the SEC and the Commodity Futures Trading Commission (CFTC) to streamline compliance requirements for crypto platforms.
With the Coinbase case now before the Second Circuit, Lummis is urging the court to restrain the SEC’s enforcement-driven approach. She believes that judges should reinforce the separation of powers by ensuring that regulatory decisions align with legislative intent rather than agency overreach. Lummis stated, “The SEC cannot act as both lawmaker and enforcer,” and sees the Coinbase case as an opportunity to establish a more balanced framework for digital assets.