Telegram was dealt a blow last week in its fight with the US Securities and Exchange Commission (SEC) when a judge hearing the case determined that its Gram digital currency could be viewed as a security.\u00a0 As such, the court ordered Telegram to stop selling Grams entirely until a final ruling is handed down.\u00a0 Telegram has already indicated that it would fight the ruling, but is now taking a different tactic.\u00a0 It wants Judge Kevin Castel, who dropped the hammer last week, to acknowledge that the ruling only impacts US-based potential investors. On Friday, Telegram\u2019s lawyers asserted that the judge\u2019s decision was not completely valid, as Telegram\u2019s US investor base was only a small portion of the entire group.\u00a0 Only 30% of the investors came from the US, with the other 70% who signed purchase agreements were all outside the country.\u00a0 As such, the lawyers assert that the SEC does not have oversight authority, making the entire court exercise irrelevant. They still want the judge to weigh in, however, in order to cover their bases.\u00a0 The lawyers explained, \u201cDefendants respectfully seek clarity with respect to the scope of the injunction, see Fed. R. Civ. P. 65(d); in particular, that the Order does not apply to Defendants\u2019 Purchase Agreements entered into abroad with non-U.S. Private Placement investors not subject to U.S. securities laws.\u201d The SEC vs. Telegram fight is just the latest in a long list of interactions by the financial agency against companies operating in the digital currency space.\u00a0 It\u2019s also an example of the agency\u2019s broad misuse of authority, as, to date, there has still not been any clear, concise definition of what constitutes a security with respect to the Bitcoin ecosystem. A lawyer who focuses on securities and technology, Josh Lawler, has authored a well-crafted op-ed to show how the SEC and the courts are wrong in their management of digital currency offerings.\u00a0 He asserts that the court \u201cstitched together disparate securities law concepts\u201d in order to reach \u201ca scrambled, incorrect conclusion\u201d to support the SEC\u2019s hypothesis. Lawler explains, \u201cWhether a gram is a security depends on whether it is an investment contract. Per the now infamous Howey Test, an \u2018investment contract\u2019 is \u2018a contract . . . whereby a person invests . . . in a common enterprise and is led to expect profits. . . from the efforts of . . . a third party.\u2019 The analysis turns on the \u2018expectation\u2019 of the purchaser and is unique in securities regulation in being a subjective test. In this case, the court weighed carefully the subjective intent of the Initial Purchasers, but not of the third-parties to whom the Initial Purchasers would (if not enjoined) sell the grams following delivery by Telegram. To do so would be impossible; they do not yet exist.\u201d To that extent, the court has not produced evidence to show that the Grams don\u2019t have a use case, making the ruling immaterial.\u00a0 Lawler adds, \u201cIt is flat out wrong for the court to conduct the Howey analysis based only on the forward contract and then to extrapolate their result to the grams.\u201d The result of the court\u2019s ruling is yet another blow for blockchain innovation in the US.\u00a0 The country is already lagging behind many others who have, at the very least, recognized the legitimacy of the blockchain and who have established rules to oversee the space.\u00a0 Now, it can only fall further behind.