Coinbase Seeks To Dismiss SEC Lawsuit, Argues It Doesn't Trade Securities
Coinbase has asked a judge to end the Securities and Exchange Commission's frivolous lawsuit accusing the world's largest publicly traded cryptocurrency exchange of violating federal securities laws.
In a filing in federal court in Manhattan, Coinbase said the SEC had “violated due process, abused its discretion, and abandoned its own earlier interpretations of the securities laws” in asserting certain regulatory authority over the crypto exchange, and that it had no authority to pursue its lawsuit because the digital assets and services it objected to did not qualify as securities, accusing the agency of overreach.
Coinbase’s filing disputed that transactions of the 12 tokens at issue in the SEC case met the definition of “investment contracts” under the Howey test and the exchange was operating as an unregistered broker, and argued the commission’s challenges to its staking program “fail as a matter of law.” The crypto firm has requested the court dismiss the case, arguing the SEC’s enforcement action was “punitive” and represented an overreach in its authority granted by Congress.
Coinbase also leaned on a recent Ripple ruling, in which a Manhattan judge ruled that the SEC regulator overstepped its authority by trying to regulate the sector; Coinbase said the SEC's lawsuit hinges on the type of transactions that the judge deemed outside of the regulator's jurisdiction.
"Our core argument is simple - we do not offer 'investment contracts' as that term has been construed by decades of Supreme Court and other binding precedent," Coinbase Chief Legal Officer Paul Grewal said in a post on X, formerly Twitter.
By ignoring that precedent, the SEC has violated due process, abused its discretion, and abandoned its own earlier interpretations of the securities laws. By ignoring that precedent, the SEC has trampled the strict boundaries on its basic authority set by Congress. 2/3
— paulgrewal.eth (@iampaulgrewal) August 4, 2023
Coinbase was sued by the SEC in June - whose boss Gary Gensler has become an attack dog for rabid Democrats-cum-Indians such as Liz Warren who is openly waging war on crypto as if that will somehow get Biden re-elected, and accused of operating illegally as a national securities exchange, broker and clearing agency without registering with the regulator, a regulator which never had issues with the Coinbase IPO filing and had never actually defined what crypto is and isn't a security, but continues to make up rules on the fly as is politically convenient for the former Goldman banker's political bosses.
Growing friction between the crypto sector and Democrats and their markets regulator has escalated amid a series of lawsuits the SEC has filed against the world's largest crypto platforms.
The SEC has said the platforms needed to register and operate in a manner akin those dealing in stocks or bonds, while the crypto sector says that new legislation is needed. Firms are closely watching the litigation between the SEC and Coinbase, with some onlookers deeming it an "existential" clash.
