Was the Securities and Exchange Commission's ruling against EtherDelta unconstitutional?
That's a question being raised by the Electronic Frontier Foundation (EFF), a nonprofit aimed at defending digital free speech. In a piece penned Tuesday Rainey Reitman, EFF's chief program officer, wrote that the SEC's cease-and-desist ruling against the founder of Ether Delta could violate the First Amendment. She noted that the organization has reached out to the SEC about this.
"In the order itself, the SEC stated that EtherDelta’s creator had violated securities laws because he “wrote and deployed” code that he “should have known” would contribute to EtherDelta’s alleged violations," Reitman wrote. "EFF today sent a public letter reminding the agency that writing and publishing code is a form of protected speech under the First Amendment, and that the courts don’t take kindly to government agencies requiring people to obtain licenses before exercising their free speech rights."
The SEC in November charged Zachary Coburn for operating an unregulated securities exchange. He paid $300,000 as part of a settlement. To be sure, the EFF is not taking a position on the verdict. Still, it notes the following:
“Setting aside whatever other issues the SEC might have had with EtherDelta, there are many reasons why software that enables decentralized currency or other exchanges may be useful to consumers. That’s why it’s important that regulatory interventions today don’t stifle that innovation by claiming they can impose liability merely for the act of writing or distributing code.”
Coin Center, a think tank in the crypto market, applauded the note, saying in a statement to The Block: “We are happy to see the EFF is as concerned as we are that publishing code alone cannot be a crime.”