Hodl Law, PLLC v. Securities and Exchange Commission

• Court: District Court, S.D. California
• Decided: July 28, 2023
• Docket: 3:22-cv-01832
• Status: Unknown

Opinion

8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA

11 HODL LAW, PLLC, CASE NO. 22-cv-1832-L-JLB 12

13 Plaintiff, ORDER GRANTING DEFENDANT 14 v. SECURITIES AND EXCHANGE 15 COMMISSION’S MOTION TO SECURITIES AND EXCHANGE DISMISS COMPLAINT [ECF NO. 5.] 16 COMMISSION

17 18 Defendants. 19

20 21 22 23 Pending before the Court is Defendant Securities and Exchange 24 Commission’s Motion to Dismiss Plaintiff’s Complaint. (Motion [ECF No. 5.]) 25 Plaintiffs oppose. The Court decides the matter on the papers submitted and 26 without oral argument. See Civ. L. R. 7.1(d.1). For the reasons stated below, the 27 Court GRANTS Defendants’ Motion. 28 // 1 I. FACTUAL BACKGROUND 2 Plaintiff is a law firm that purportedly focuses on legal and regulatory 3 issues regarding digital assets, also known as digital currency units (“DCUs”) and 4 cryptocurrencies. Plaintiff engages in transactional activity on the Ethereum 5 Network which requires use of the Ether DCU in order to conduct such 6 transactions. Plaintiff seeks a declaratory ruling from the Court that engaging in

7 transactional activities on the Ethereum Network using the Ether DCU does not 8 implicate the Securities Act of 1933, 15 U.S.C. § 77a et seq. 9 II. PROCEDURAL BACKGROUND 10 On November 21, 2022, Plaintiff filed the Complaint in this action 11 asserting jurisdiction under the Declaratory Relief Act, 28 U.S.C. § 2201, Federal 12 Rule of Civil Procedure 57, 28 U.S.C. § 1331, and the Securities Act, 15 U.S.C. 13 §§ 77v and 78aa, and seeking declaratory relief. [ECF No. 1.] 14 On February 6, 2023, Defendant filed this Motion to Dismiss for lack of 15 Subject Matter Jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1) . 16 (Mot. [ECF No. 5.]) On February 27, 2023, Plaintiff filed a Response in 17 Opposition. (Oppo. [ECF No. 6.]) On March 6, 2023, Defendant filed a Reply. 18 (Reply [ECF No. 7.]) On March 22, 2023, Plaintiff filed a Notice of Supplemental 19 Authority. (Pl. Supp. Auth. [ECF No. 8.]) On March 30, 2023, Defendant filed a 20 Response to the Notice of Supplemental Authority. (Resp. Supp. Auth [ECF No. 21 9.]) On June 23, 2023, Plaintiff filed a Second Notice of Supplemental Authority 22 and Request to File Supplemental Briefing. (Second Supp. Auth. [ECF No. 10.]) 23 On July 6, 2023, Defendant filed a Response to Plaintiff’s Second Notice of 24 Supplemental Authority. [ECF No. 11.] 25 III. LEGAL STANDARD 26 Federal courts are courts of limited jurisdiction. Kokkonen v. Guardian 27 Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (citations omitted). A federal court 28 must satisfy itself of jurisdiction over the subject matter before proceeding to the 1 2 merits. Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583 (1999). “It is to be 3 presumed that a cause lies outside this limited jurisdiction, and the burden of 4 establishing the contrary rests upon the party asserting jurisdiction.” Kokkonen, 5 511 U.S. at 377. 6 The court must dismiss an action if subject matter jurisdiction is lacking. 7 Fed. R. Civ. P. 12(h)(3); see also Hansen v. Dep’t of Treasury, 528 F.3d 597, 600 8 (9th Cir. 2007). Federal Rule of Civil Procedure 12(b)(1) permits dismissal of a 9 complaint for lack of subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1). A Rule 10 12(b)(1) jurisdictional attack may be facial or factual. In a facial attack, the 11 challenger asserts that the allegations contained in a complaint are insufficient on 12 their face to invoke federal jurisdiction. Safe Air for Everyone v. Meyer, 373 F.3d 13 1035, 1039 (9th Cir. 2004). In contrast, “in a factual attack, the challenger 14 disputes the truth of the allegations that, by themselves, would otherwise invoke 15 federal jurisdiction.” Id. When reviewing a factual attack, “the district court may 16 review evidence beyond the complaint without converting the motion to dismiss 17 into a motion for summary judgment.” Id. Where a 12 (b)(1) motion to dismiss is 18 19 based on lack of standing, the Court must defer to the plaintiff's factual 20 allegations and must “presume that general allegations embrace those specific 21 facts that are necessary to support the claim.” Lujan v. Defenders of Wildlife, 504 22 U.S. 555, 561 (1992) (internal quotation marks omitted). “At the pleading stage, 23 general factual allegations of injury resulting from the defendant's conduct may 24 suffice.” Id. at 560. In short, a 12(b)(1) motion to dismiss for lack of standing can 25 only succeed if the plaintiff has failed to make “general factual allegations of 26 injury resulting from the defendant's conduct.” Id. Because the SEC is 27 challenging the factual basis of Plaintiff’s standing, the Court may review 28 evidence beyond the complaint. Courthouse News Service v. Planet, 750 F.3d 1 2 776, 780 (9th Cir. 2014). 3 IV. DISCUSSION 4 Defendant seeks dismissal of Plaintiff’s claims arguing that this Court does 5 not have jurisdiction over the claims because (1) there is no case or controversy 6 between Hodl Law and the SEC, (2) Hodl Law has no standing, (3) Hodl Law has 7 not pled a ripe dispute, and (4) the Administrative Procedure Act does not provide 8 authority to bring this case. (Mot. at 4). 9 1. STANDING 10 The Declaratory Judgment Act permits a federal court to “declare the rights 11 and other legal relations” of parties to “a case of actual controversy.” 28 U.S.C. s 12 2201. “The ‘actual controversy’ requirement of the Act is the same as the ‘case or 13 controversy’ requirement of Article III of the United States Constitution.” Societe 14 de Conditionnement en Aluminium v. Hunter Engineering Co., Inc., 655 F.2d 938, 15 942 (9th Cir. 1981)(citing Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239-40 16 (1937). “Article III of the United States Constitution limits [a district court’s] 17 jurisdiction to actions involving actual ‘cases’ or ‘controversies,’ a limitation that 18 manifests itself through the doctrine of standing.” Coakley v. Sunn, 895 F.2d 604, 19 606 (9th Cir. 1990). 20 Standing requires that (1) plaintiff suffered an injury in fact; (2) plaintiff 21 can show the defendant's causal connection to the injury; and (3) plaintiff can 22 demonstrate that the injury would be redressed by a favorable decision. Spokeo, 23 Inc. v. Robins, 578 U.S. 330, 338 (2016). A plaintiff must allege “‘such a personal 24 stake in the outcome of the controversy as to warrant his invocation of federal 25 court jurisdiction and to justify exercise of the court's remedial powers on his 26 behalf.’” Warth v. Seldin, 422 U.S. 490, 498-99 (1975). The plaintiff must have 27 suffered an “injury in fact” which is “an invasion of a legally protected interest” 28 1 that is “concrete and particularized” and “actual or imminent, not conjectural or 2 hypothetical.” Spokeo, 578 U.S. at 339 (quoting Lujan, 504 U.S. at 560). A 3 “particularized” injury is one that “affect[s] the plaintiff in a personal and 4 individual way.” Id. The Article III requirement that an injury is “actual or 5 imminent” “ensure[s] that the alleged injury is not too speculative for Article III 6 purposes---that the injury is certainly impending.” Clapper v. Amnesty Int'l USA, 7 568 U.S. 398, 409 (2013). “[W]hen plaintiffs seek to establish standing to 8 challenge a law or regulation that is not presently being enforced against them, 9 they must demonstrate a realistic danger of sustaining a direct injury as a result of 10 the statute’s operation or enforcement.” LSO, Ltd. v. Stroh, 205 F.3d 1146, 1154 11 (9th Cir. 2000) (citation omitted).

12 Defendant asserts that Hodl Law is unable to identify any actual or 13 imminent injury sufficient to establish standing, noting that Hodl Law has not 14 alleged that the SEC has investigated, or is likely to investigate Hodl Law, that 15 the SEC has not investigated or prosecuted another Ethereum network user for 16 conduct similar to Hodl Law’s conduct, and that Hodl Law has not suffered or is 17 likely to suffer any financial damage related to any SEC activity. (Mot. at 6-7). 18 In response, Hodl Law argues that it has standing under the “firm 19 prediction” rule because there is a substantial risk that injury will occur to 20 Plaintiff due to Defendant’s actions. (Oppo. at 6). Plaintiff contends that the SEC 21 has filed over one hundred cases where the value of the DCU has plummeted, and 22 the value of Hodl Law’s Ether DCU would likewise plummet if it is targeted by 23 the SEC. (Id.) In this sense, the Court can “firmly predict” the consequences of a 24 regulation-by-lawsuit action against Hodl Law—or any defendant the SEC 25 chooses to target that uses the Ethereum Network and Ether DCU, therefore a 26 “controversy” sufficient to necessitate declaratory relief exists. (Id). 27 Hodl Law fails to identify a case or controversy between it and the SEC 28 sufficient to demonstrate standing. In the Complaint, Plaintiff does not claim that 1 the SEC has investigated the Firm, or prosecuted it, but instead alleges that the 2 SEC might bring suit against it for its activity on the Ethereum Network for 3 violating securities laws. The possibility that the SEC may file suit against the 4 Plaintiff is not definite and concrete, nor does it touch “the legal relations of 5 parties having adverse legal interests.” Aetna, 655 F.2d at 943. 6 Plaintiff claims that the SEC has pursued civil enforcement action against a 7 defendant for trading in crypto assets, alluding that the Ethereum Network is a 8 security in SEC v. Wahi, 2023 WL 3582398, *1, 22-cv-1009 (W.D. Wash. July 9 21, 2022), but the court in Wahi did not determine whether the crypto assets at 10 issue were securities. Instead, Wahi indicates nothing more than what Plaintiff 11 asserts, that the SEC is filing lawsuits against individuals trading in crypto 12 currency under the Securities Act. Although Hodl Law claims that the SEC has 13 failed to announce rules regarding the classification of DCU’s as securities 14 despite Plaintiff’s request for guidance to ensure compliance, Plaintiff does not 15 identify any authority compelling Defendant to engage in specific rulemaking, 16 pursue specific regulatory approaches, or respond to private parties’ requests for 17 guidance. Instead, Hodl Law’s alleged dispute is more an “abstraction[ ]” than an 18 “actual case” because the supposed injury has not materialized and may never 19 materialize.” Montana Env., 766 F.3d at 1190. Accordingly, Plaintiff fails to 20 allege an injury in fact or a realistic danger of suffering direct injury as a result of 21 Defendant’s conduct. See LSO, Ltd., 205 F.3d at 1154. 22 2. RIPENESS 23 “The ripeness doctrine demands that litigants state a claim on which relief 24 can be granted and that litigants' asserted harm is ‘direct and immediate’ rather 25 than speculative or hypothetical.” Hillblom v. United States, 896 F.2d 426, 430 26 (9th Cit. 1990). “The basic rationale behind the ripeness doctrine ‘is to prevent the

27 courts, through premature adjudication, from entangling themselves in abstract 28 disagreements,’ when those ‘disagreements’ are premised on ‘contingent future 1 events that may not occur as anticipated, or indeed may not occur at all.’” Thomas 2 v. Union Carbide Agr. Prods. Co., 473 U.S. 568, 580–81 (1985). 3 “Ripeness has two components: constitutional ripeness and prudential 4 ripeness. Thomas v. Anchorage Equal Rights Comm'n, 220 F.3d 1134, 1138 (9th 5 Cir.2000) (en banc). “The constitutional component of the ripeness inquiry is 6 often treated under the rubric of standing and, in many cases, ripeness coincides 7 squarely with standing's injury in fact prong.” Id. “The constitutional ripeness of 8 a declaratory judgment action depends upon ‘whether the facts alleged, under all 9 the circumstances, show that there is a substantial controversy, between parties 10 having adverse legal interests, of sufficient immediacy and reality to warrant the 11 issuance of a declaratory judgment.’” United States v. Braren, 338 F.3d 971, 975 12 (9th Cir.2003). “[B]ecause the focus of our ripeness inquiry is primarily temporal

13 in scope, ripeness can be characterized as standing on a timeline.” Thomas, 220 14 F.3d at 1138. “A dispute is ripe in the constitutional sense if it ‘present[s] 15 concrete legal issues, presented in actual cases, not abstractions.’” Montana Env., 16 766 F.3d at 1188 (citing Colwell v. HHS, 558 F.3d 1112, 1123 (9th Cir.2009). 17 Plaintiff’s claim is not ripe under the constitutional ripeness doctrine. The 18 crux of Hodl Law’s complaint is that the SEC has not made a final decision with 19 regard to whether the Ethereum Network and Ether DCU’s are securities under 20 the Securities Act, but this does not constitute a substantial controversy between 21 Hodl Law and the SEC to warrant issuance of a declaratory judgment. There is no 22 allegation that the SEC has investigated Hodl Law or brought suit against them 23 for their conduct with regard to the Ethereum Network and the Ether DCU’s. See 24 Braren, 338 F.3d at 975. Nor is there any allegation of a controversy with any 25 immediacy and reality to warrant the issuance of a declaratory judgment.” Id. 26 With regard to prudential ripeness, a court must assess (1) “the fitness of 27 the issues for judicial decision” and (2) “the hardship to the parties of withholding 28 court consideration.” Abbot Laboratories v. Gardner, 387 U.S. 136, 149 1 (1967)(distinguished on other grounds in Calfano v. Sanders, 430 U.S. 99 (1977). 2 “Under the first prong, ‘agency action is fit for review if the issues presented are 3 purely legal and the regulation at issue is a final agency action.’” Association of 4 American Medical Colleges v. United States, 217 F.3d 770, 780 (9th Cir. 5 2000)(citing Anchorage v. United States, 980 F.2d 1320, 1323 (9th Cir.1992). 6 “Courts traditionally take a pragmatic and flexible view of finality.” Id. (quoting 7 Abbott Labs, 387 U.S. at 149–50. “The core question is whether the agency has 8 completed its decisionmaking process, and whether the result of that process is 9 one that will directly affect the parties.” Franklin v. Massachusetts, 505 U.S. 788, 10 797 (1992). Courts consider the “following elements: whether the administrative 11 action is a definitive statement of an agency's position; whether the action has a 12 direct and immediate effect on the complaining parties; whether the action has the 13 status of law; and whether the action requires immediate compliance with its 14 terms.” Ass’n. of Am. Med. Colleges, 217 F.3d at 780. 15 According to Defendant, Hodl Laws claim is not ripe because there is no 16 final agency action, and Hodl Law has not shown that it will suffer any “real 17 cognizable hardship” due to “delayed [judicial] review.” (Mot. at 8: Reply at 5-6). 18 Plaintiff contends the claim is prudentially ripe because 1) the SEC’s 19 behavior with respect to digital assets, and the Ethereum network and Ether DCU 20 specifically, constitutes a “final agency action,” and 2) it will suffer hardship if 21 the Ethereum Network and Ether DCU are subject to the Securities Act because 22 Hodl Law could face disciplinary action by the state bar. (Id. at 14-15). Hodl Law 23 claims that the SEC is determining a DCU’s status as a security through judicial 24 review which puts them at a disadvantage.1 (Id. at 8). 25

1 Plaintiff further contends that enforcement against Hodl Law’s secondary use of 26 the Ethereum Network and Ether DCU violates its First and Fifth Amendment 27 rights because it uses the Network and DCU in engaging in constitutional protected 28 commercial speech in a digital metaverse, and that the SEC’s practice of filing a lawsuit which drives down the value of DCU’s constitutes a take of the value of 1 Plaintiff’s claim is not ripe under the prudential ripeness doctrine. Whether 2 the Ethereum Network and Ether DCU’s are securities is a purely legal question 3 not fit for review “until the scope of the controversy has been reduced to more 4 manageable proportions, and its factual components fleshed out, by concrete 5 action applying the regulation to the claimant's situation in a fashion that harms or 6 threatens to harm him.” Lujan, 497 U.S. at 891. “The purpose of the ‘fitness’ test 7 under Abbott is to delay consideration of the issue until the pertinent facts have 8 been well-developed in cases where further factual development would aid the 9 court's consideration.” Coleman, 560 F.3d at 1009(citing Nat'l Park Hospitality 10 Ass'n v. Dep't of the Interior, 538 U.S. 803, 812 (2003) (further factual 11 development would “significantly advance our ability to deal with the legal issues 12 presented” so the matter determined not ripe for judicial review) (internal 13 quotation marks omitted).

14 With regard to the second prong, finality, the SEC’s actions do not 15 constitute a final agency action sufficient to establish that the claim is ripe. “An 16 ‘agency action’ includes any ‘rule,’ defined by the Act as ‘an agency statement of 17 general or particular applicability and future effect designed to implement, 18 interpret, or prescribe law or policy,’ ss 2(c), 2(g), 5 U.S.C. ss 551(4), 551(13).” 19 Abbot Labs, 387 U.S. at 149. “Except where Congress explicitly provides for our 20 correction of the administrative process at a higher level of generality, we 21 intervene in the administration of the laws only when, and to the extent that, a 22 specific ‘final agency action’ has an actual or immediately threatened effect.” 23 Lujan, 497 U.S. at 891. 24 Plaintiff argues that the SEC’s behavior in the context of DCU’s constitutes 25 final agency action arguing that “the SEC’s seminal speech excluding the 26 Ethereum Network and Either DCU from the Securities Act was the 27

28 the DCU. (Oppo. at 12). Plaintiff did not raise these arguments in the Complaint, therefore, the Court does not address them here. 1 consummation of a decision-making process with over two dozen high-ranking 2 SEC officials, and the result of that public pronouncement enabled Hodl Law to 3 reasonably rely on its rights and obligations and legal consequences of each.” 4 (Oppo. at 21). Plaintiff cites In Independent Broker-Dealers’ Trade Ass’n v. SEC, 5 442 F.2d 132, 139 (D.C. Cir. 1971) claiming that appellate courts have held the 6 SEC’s mere requests can represent final agency action. (Oppo. at 19). While it is 7 true that the determination of finality does not rest on the issuance of a command 8 by an agency, the Court must take account of the practicalities of the agency 9 action, determining whether the agency action is effective and final as to the 10 aggrieved party. Id. at 140. Here, there is no final action that is effective and final 11 as to Hodl Law regarding the status of the DCU’s in question as illustrated by the 12 fact that the SEC announced in a speech that Ethereum Network and Ether DCU’s 13 are excluded from the reach of the SEC as securities yet the SEC files numerous 14 lawsuits asserting that DCU’s are securities. 15 Plaintiff filed two notices of supplemental authority arguing that the 16 additional material supports the assertion that the SEC has made public 17 statements that the Ethereum Network and Ether DCU’s are not securities. [ECF 18 Nos. 8, 10.] In the first notice of supplemental authority, Plaintiff claims that four 19 new developments have occurred that directly address whether the SEC can 20 determine the securities status of the Ethereum Network and Ether DCU’s: (1) 21 comments made during a Senate committee hearing involving the Chair of the 22 Commodity Futures Trading Commission in which the Chair asserts that the 23 CFTC has complete jurisdiction over the Ethereum Network and Ether DCU’s; 24 (2) a March 9, 2023 case filed by the New York Attorney General against a 25 digital asset alleging the Ether DCU is a security under federal law; (3) an amicus 26 brief in the Wahi case arguing that the SEC’s approach of judicial determination 27 of the security status of cryptocurrency violated due process and the SEC’s 28 obligations under the Administrative Procedure Act; and (4) a March 11, 2023 1 bankruptcy order where the SEC objected to confirmation of the debtor’s plan 2 because the SEC claimed that the DCU had aspects of a security. (Not. Supp. 3 Auth. at 2-4 [ECF No. 8.]) 4 In the second notice, Plaintiff cites to a May 16, 2023, district court 5 decision to unseal portions of the Hinman Speech Documents which, according to 6 Plaintiff, demonstrate that in 2018 the SEC authorized a speech that Ether and the 7 Ethereum Network are not securities under the jurisdiction of the SEC which 8 constitutes a “final agency action.” (Not. Second Supp. Auth. at 2 [ECF No. 10.]) 9 The documents are not binding authority, nor do they support Plaintiff’s 10 conclusion that the SEC has formally adopted the position that the Ether Network 11 and Ether DCU’s are not securities. Instead, the Court finds there is no “final 12 agency action” by the SEC with regard to Ethereum DCU’s because the SEC has 13 not issued a definitive statement of its position that has a direct and immediate 14 effect on Plaintiff and that requires immediate compliance. See Ass’n. Am. Med. 15 Colleges, 217 F.3d at 780. No concrete action has applied to Plaintiff in a way 16 that harms or threatens to harm the law firm by virtue of the SEC’s failure to act, 17 therefore it is not a final agency action. Lujan, 497 U.S. at 891. Although 18 Plaintiff contends the Hinman Speech Documents show that the SEC deems the 19 Ethereum Network and Ether DCU’s to not be securities, they do not illustrate an 20 evaluative process yielding a sufficient record “to enable judicial review.” See 21 Western Watersheds Project v. Bernhardt, 519 F.Supp. 3d 763, 782 (D.Idaho 22 2021). Instead, they are commentary that illustrate the ongoing confusion 23 surrounding the status of cryptocurrencies as securities and demonstrate the need 24 for the SEC to issue definitive guidance rather than approaching the issue in 25 piecemeal litigation. 26 “The other element for consideration is hardship, but that does not mean 27 just anything that makes life harder; it means hardship of a legal kind, or 28 something that imposes a significant practical harm upon the plaintiff.” Natural 1 Resources Defense Council v. Abraham, 388 F.3d 701, 706 (9th Cir. 2004). The 2 hardship must be “immediate, direct, and significant.” Colwell, 558 F.3d at 1128. 3 Here, Hodl Law argues that it “suffers the certainty that the value of its Ether 4 DCU’s will be wiped out if the SEC initiates any enforcement lawsuit alleging 5 security status,” and that it could face disciplinary action by the state bar because 6 it uses the Ethereum Network in the firm’s transactional practice. (Oppo. at 15). 7 The hypothetical harm that Plaintiff might suffer if the SEC determines that the 8 Ethereum Network and Ether DCU’s are securities does not constitute an 9 immediate and direct hardship because it is not concrete. This is so despite the 10 SEC’s recent uptick in lawsuits filed against DCU users. While Plaintiff argues 11 that this history of prosecution elevates the risk of harm, there has been no 12 specific warning by the SEC to Hodl Law or threat to initiate proceedings which 13 has impacted the law practice in an immediate, direct and significant manner, 14 therefore the claim is not ripe. Colwell, 558 F.3d at 1128. 15 Nor has Plaintiff sufficiently asserted a case or controversy under the “firm 16 prediction rule.” Under this rule, a controversy may be ripe “if it is ‘inevitable’ 17 that the challenged rule will ‘operat[e]’ to the plaintiff's disadvantage—if the 18 court can make a firm prediction that the plaintiff will apply for the benefit, and 19 that the agency will deny the application by virtue of the rule—then there may be 20 a justiciable controversy that the court may find prudent to resolve.” Reno v. 21 Catholic Social Services, 509 U.S. 43, 69 (1993)(O’Connor concurrence); 22 Montana Environmental Information Center v. Stone-Manning, 766 F.3d 1184, 23 1190 (9th Cir. 2014)(rule applies where event is inevitable and plaintiff’s injury is 24 nearly certain.) 25 As a primary matter, the “firm prediction rule” arose in the context of a 26 benefit conferring regulation, and Plaintiff has not identified authority to allow its 27 application in the present circumstances. Even if the rule applies here, Plaintiff 28 has not sufficiently alleged that it is inevitable that the SEC will bring suit against 1 them. Although the SEC’s failure to issue firm guidance on whether the Ethereum 2 Network and Either DCU’s are securities creates insecurity among the users, this 3 uncertainty demonstrates why the controversy is uncertain at best. Because the 4 Court cannot make a firm determination that the SEC will bring suit against Hodl 5 Law, there is no controversy under the “firm prediction rule.” See Freedom to 6 Travel v. Newcomb, 82 F.3d 1431, 1435-36 (9th Cir. 1996). 7 Moreover, if the SEC issued a determination finding that the transactions 8 involving Ethereum or Ether constituted a sale or offer of a security, it remains 9 speculative that such a decision would harm Hodl Law. Natural Res. Def. 10 Council, 388 F.3d at 706-07. For the foregoing reasons, the Court finds that the 11 claim is not ripe. 12 3. ADMINISTRATIVE PROCEDURE ACT (“APA”) 13 The APA allows for judicial review of two categories of agency conduct: 14 (1) “agency action made reviewable by statute” and (2) “final agency action for 15 which there is no other adequate remedy in a court.” 5 U.S.C. § 704. 16 Defendant argues that the only possible basis for the claim is the APA, yet, 17 Hodl Law themselves claim that the APA cannot apply in these circumstances. 18 (Mot. at 10). Defendant further contends that Hodl Law’s alternative argument 19 that it can make a claim under the APA fails because Hodl Law has not identified 20 any statute that provides for judicial review except to cite actions the SEC has 21 brought to enforce the federal securities laws, which are plainly inapplicable here. 22 (Id.) In addition, there is no final agency action that “marks the consummation of 23 the agency’s decision-making process” or determines “rights or obligations,” 24 instead citing a speech as the consummation of the process. (Reply at 9). 25 Plaintiff contends that the APA is inapplicable because the SEC can only 26 bring court actions that constitute or will constitute a violation of the provisions 27 of the Securities Act, and the APA is limited to governing the process by which

28 federal agencies develop and issue regulations under those agencies’ scope of 1 authority. (Oppo. at 16). In the alternative, Plaintiff argues that the SEC’s actions 2 can be reviewed under the APA because Defendant has cited no statute that 3 precludes judicial review of whether any digital asset is a security under the 4 Securities Act and their request for clarification constitutes a final agency action. 5 (Id. at 18-19). Should the Court grant the SEC’s motion, Plaintiff seeks leave to 6 amend. (Id. at 22). 7 The Court finds that Plaintiff cannot bring the present claims pursuant to 8 the APA. Plaintiff has not identified any statute that governs review of the SEC’s 9 action, or inaction, regarding the Ethereum Network or Ether DCU’s. Although 10 Plaintiff alternatively claims that the SEC’s actions permit judicial review under 11 the APA, the SEC’s actions do not constitute “final agency action” because there 12 is no “definitive statement of the agency's position,” the SEC’s actions do not 13 have a “direct and immediate effect on the day-to-day operations” of Plaintiff, 14 and no action by the SEC requires “immediate compliance with the terms.” 15 Center for Biological Diversity v. Haaland, 58 F.4th 412, 417 (9th Cir. 2023). 16 Accordingly, the Court finds that Plaintiff has not alleged a claim under the APA. 17 As noted above, the Court finds no case or actual controversy in the present 18 matter, therefore, declaratory judgment is not warranted. In light of the 19 speculative nature of Plaintiff’s claims, the Court concludes that no modified 20 contention “consistent with the challenged pleading ... [will] cure the deficiency,” 21 therefore the motion to dismiss is granted without leave to amend. DeSoto v. 22 Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992) (quoting Schriber 23 Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)). 24 // 25 // 26 // 27 // 28 // 1 V. CONCLUSION AND ORDER 2 For the foregoing reasons, Defendants’ Motion to Dismiss is GRANTED 3 || and the case is dismissed without leave to amend. [ECF No. 5.] 4 IT IS SO ORDERED 5 6 || Dated: July 28, 2023

Hi . James Lorenz 9 United States District Judge

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