The extraterritorial reach of US securities laws

There is a clear presumption against applying U.S. law to foreign transactions.

In 2010, the U.S. Supreme Court held in Morrison v. National Australia Bank Ltd. that in order to apply the anti-fraud provisions of the U.S. securities laws, the securities in question either had to be listed on a domestic exchange or the transaction had to be domestic in character.

Others say the decision was designed to expand the reach of U.S. law.

Adding U.S. law on top of those is likely to create overlapping, redundant and potentially inconsistent requirements.

Their approach to regulation of securities transactions and markets reflects their own unique priorities and needs, while blanket application of U.S. law ignores their legitimate policy considerations.

Foreign governments have repeatedly disapproved of U.S. efforts to enforce anti-fraud mandates in their markets; they are no more likely to welcome our regulations in their crypto markets.

In the past, international reaction has suggested that the extraterritorial application of U.S. law is intrusive and arrogant.

This, in turn, increases the impetus for pushback where other nations seek to impose their laws and vision on U.S. businesses.

Extraterritorial application of U.S. domestic law diminishes the role of traditional international law, resulting not only in confusion, over-regulation and legal uncertainty but also reducing the possibility of developing an international consensus where a harmonized, cooperative approach to regulation of crypto is created.

This is Part 3 of a three-part series on the legal case between the U.S. SEC and Telegram's claims to be securities.