The case involves a former product manager at crypto exchange Coinbase and two associates who are accused of insider trading. 

However, the trade group Chamber of Digital Commerce has called on a federal court to dismiss the case, arguing that it could have wide and negative ramificaitions for the digital assets sector.

At the heart of the association's concern is the SEC's apparent labelling of some crypto-assets as securities, as opposed to commodities or currencies. 

The regulation of the digital assets market has long been viewed as a critical issue but has become more urgent following the collapse of crypto exchange FTX in November.

However, while major regulators have all made proclamations or launched consultation papers on the subject, none is yet to bring specific rules into force that cover the whole sector. One of the sticking points has been how various digital or crypto assets will be categorised.  

In the SEC case, the defendants are accused of purchasing 25 crypto assets for profit based on insider knowledge. Nine of those 25 assets are categorised as securities. 

The Chamber of Digital Commerce argues that the SEC is trying to bring in regulations through the back-door and before any rules or categories have been agreed by the industry and imposed by Congress. 

“We consider this regulation by enforcement because it’s creating new legal precedent through an enforcement action, but it would be much better for the entire industry if we just had clear rules to the road,” said Perianne Boring, the founder and chief executive officer of the Chamber of Digital Commerce, in remarks reported by Reuters. 

Instead, the SEC should have published a rule outlining its expectatons or else waited for legal certainty from the US Congress.

It is not the first time this issue has come up. The SEC has long argued that certain crypto assets, such as crypto tokens, should be classed as securities and be subject to existing securities law.

Meanwhile, some players in the crypto market have argued that this would subject some token manufacturers to state and regulatory actions and even private litigation. In addition, the value of the tokens would likely suffer negatively from such a decision.