In the ongoing legal battle between Coinbase and the U.S. Securities and Exchange Commission (SEC), Coinbase has filed a motion to dismiss the SEC’s complaint. The exchange argues that the cryptocurrencies listed on its platform should not be classified as securities and fall outside the SEC’s jurisdiction.
Coinbase Challenges SEC’s Jurisdiction
Coinbase contests the SEC’s allegations that several cryptocurrencies offered on its platforms are unregistered securities. The company argues that the cryptocurrencies traded on its secondary market platform do not involve arrangements where promoters sell assets tied to contracts. Their point to the Supreme Court’s Howey case as support for its position, asserting that these cryptocurrencies do not meet the definition of investment contracts.
According to the cryptocurrency exchange, the value derived from transactions conducted on its platform lies in the assets themselves and not in the underlying companies that generated them. The issuers of these tokens have no obligations to investors, further strengthening the argument that these transactions are not securities. They maintain that none of the assets identified by the SEC qualify as securities based on the Howey test.
Changing Stance and The Calls for Regulation
Coinbase highlights the changing stance of SEC Chairman Gary Gensler regarding the regulator’s powers over cryptocurrencies. The company also underscores its own repeated calls for regulation and emphasizes that Congress has begun exploring the issue of crypto regulation. Coinbase positions itself as a willing participant in regulatory discussions and believes that new laws and rulemaking should guide the industry.
In the 177-page response, highlighted that the SEC based its charges on the claim that 12 of the listed crypto tokens traded on the exchange are securities. It is worth noting that six of these mentioned crypto assets were already being traded on Coinbase when the SEC approved the exchange to go public. Later they argue that since the SEC did not classify any of these crypto assets as securities at that time, the legal charges against them should be dismissed without delay.
The full response document can be found here.
Coinbase’s motion to dismiss the SEC’s lawsuit signifies a significant development in the legal dispute. The exchange firmly argues against the SEC’s jurisdiction and the classification of cryptocurrencies as securities. Coinbase asserts that the value derived from transactions lies in the assets themselves, refuting the SEC’s claims. The outcome of this motion will have implications for the regulatory landscape surrounding cryptocurrencies and may shape future SEC actions in the industry.