SEC made up ‘digital asset security’ out of thin air, says US Rep

The US Securities and Exchange Commission (SEC) is regularly criticized by government officials and crypto leaders for its claim on “Digital Asset Security.” The commission recently issued a rare apology in the Binance case, admitting that its use of the term “crypto-asset securities” caused confusion. However, the damage has already been done to many in the crypto industry.

In the latest move, US lawmaker Rep. Ritchie Torres called out the SEC’s misrepresentation and claim over crypto. He claimed that the commission invented the term ‘digital asset security’ out of thin air.

Lawmaker Torres slams the SEC

Rep. Ritchie Torres in an X post mentioned that the term ‘digital asset security’ does not appear anywhere in any law that is enacted by Congress nor does it show up in any rule promulgated by the SEC. The same term doesn’t even come in any decision rendered by the Supreme Court. He added that the crypto linked term is also not presented anywhere in the 2 million pages of the Federal Register.

The term ‘digital asset security’ does not appear anywhere in any law enacted by Congress or in any rule promulgated by the SEC or in any decision rendered by the Supreme Court. It appears nowhere in the 2 million pages of the Federal Register. If it comes from neither statute… pic.twitter.com/ucSaCzEvOU

— Rep. Ritchie Torres (@RepRitchie) September 19, 2024

Stuart Alderoty, Chief Legal Officer at Ripple, presented his views on the much controversial matter. He suggested that the SEC has a pattern of using the made-up term ‘crypto asset security’ to mislead judges. Earlier, he caught off the agency’s admitting that “crypto asset security” is sort of a made-up term. 

SEC’s confusion over crypto securities

The agency had retracted its blanket use of the term “crypto asset securities” in a court filing related to its case against Binance. The retraction came with an apology for causing confusion. As per the September 12 filing, the SEC now admits it “no longer uses the shorthand term” and regrets any confusion caused by labeling 10 tokens, including Solana, Cardano (ADA), and Polygon, as “securities.”

The agency clarified that it isn’t the token itself that’s considered a security, but rather the set of contracts, expectations, and understandings around its sale and distribution. This marked a major pivot in how the SEC frames crypto regulation. It left the industry insiders questioning how future cases will be approached.

Torres calls for clear regulations

Crypto-friendly Rep. Ritchie Torres had earlier urged the Commodity Futures Trading Commission (CFTC) to shift its focus toward regulating election markets. This came after a recent court ruling went against the agency.

In a letter to CFTC Chair Rostin Behnam, Torres highlighted the risks posed by “less secure and unregulated exchanges” operating in the election market. He advocates for a proactive approach to regulation.