Exchanging cryptocurrencies by submitting a motion to dismiss the SEC’s case, Coinbase has made a big advancement in its legal battle with the American Securities and Exchange Commission (SEC). The SEC alleges that specific cryptocurrencies on Coinbase are unregistered securities. Coinbase disputes the claim, stating they are not under the SEC’s jurisdiction.
Twelve cryptocurrencies that were accessible on Coinbase’s trading or wallet platforms, according to the SEC’s lawsuit, were unregistered securities. Coinbase responded to the SEC’s claim with a 177-page document. They assert that the listed cryptocurrencies do not qualify as investment contracts and should not be classified as securities.
Coinbase argues that its secondary market platform does not include a promoter selling contract-tied assets, citing the Howey case. The company asserts that transactions conducted on the platform do not qualify as securities. Coinbase emphasizes that token issuers have no contractual obligations to investors. They assert that transactions on Coinbase’s secondary market do not involve the purchase of securities. Coinbase argues that the value derived from transactions lies in the assets themselves. The underlying businesses that generated them are not the primary source of value.
It also notes that Gary Gensler, the chairman of the SEC, has modified his position on the authority of the regulator over cryptocurrencies. The motion emphasizes Coinbase’s calls for regulation and acknowledges Congress’s involvement in crypto legislation.
Coinbase Position and Implications for Digital Asset Regulation
It argues that even if the SEC’s regulatory authority is valid, the lawsuit should be dismissed. The exchange claims violations of its due process rights and alleged abuse of the legal system. Coinbase argues for the dismissal of the case. It asserts that it adhered to guidance from the SEC, senior SEC staff, and the courts. The exchange sought advice from the SEC and voluntarily complied with various regulators’ requirements. Regarding the application of securities laws to the cryptocurrency market, authorities took these actions.
Using the “major questions” theory, the motion also argues that the SEC’s decision violated Coinbase’s right to due process. According to Coinbase, we should avoid adopting the SEC’s constructions, and Congress should address important policy issues impacting the sector.
Coinbase has established a seven-week timeline for filing the motion for judgment, the SEC’s opposition, and its answer to the opposition. Coinbase has asked the judge for permission to do so.
Coinbase’s Chief Legal Officer (CLO), Paul Grewal, outlined the company’s stance on Twitter and declared its openness to communicate with any authority including the SEC. Grewal restated Coinbase’s stance on the need for new legislation and regulations. He emphasized that the allegations in the case have no basis and should be dismissed.
The resolution of this legal dispute between Coinbase and the SEC will significantly impact the regulation of digital assets and the extent of control the SEC exercises over the Bitcoin market.