EFF Criticizes SEC’s Action Against a Decentralized Exchange, Says Code is Speech

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Summary

EFF says: “Even if the individuals never deployed the code and never actively maintained or promoted a decentralized exchange, this overly broad language implies the SEC could well expect people merely writing and publishing code to register as a national securities exchange or face liability. That led to a striking down of crypto exporting licensing requirements, with exporting in the digital realm meaning mere publishing of cryptography code. They currently accept Bitcoin and Bitcoin Cash donations, presumably from BitPay which hasn’t yet added other cryptos like Ethereum. A strong showing of support there might perhaps persuade them to be a lot more active in protecting cryptonian liberties through the court system and  otherwise. This isn’t just dangerous because it could quell research; it’s unconstitutional.

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The Electronic Frontier Foundation (EFF) has sent an open letter to the Securities and Exchanges Commission (SEC) where they say “imposing liability for, or prior restraints on, publishing and distributing code would violate the First Amendment and chill innovation.”

EFF says they are concerned about overly broad language used by SEC in statements related to a cease and desist order against a decentralized exchange, Etherdelta.

Referring to a statement made last November, EFF says:  “The SEC’s broad language about ‘an entity that provides an algorithm’ could include cryptographic researchers and coders who are publishing ideas or code for debate and discussion, and working to develop systems that could benefit the public.”

They argue that courts have upheld for decades the principle that code is speech protected by the first amendment, thus any prior...

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