SEC Responds to Coinbase’s Motion to Dismiss
The U.S. Securities and Exchange Commission (SEC) has filed a 40-page opposition motion in response to Coinbase’s motion to dismiss its case for violating securities laws.
In June of this year, the SEC charged the leading U.S. crypto exchange with illegally offering securities on its platform and providing broker and clearing agency services without registering with the regulator.
Coinbase responded to the lawsuit by arguing that the crypto tokens it listed were not “investment contracts” and that the SEC had no authority over crypto-related matters.
In its opposition motion, the SEC presents a four-point argument to demonstrate that its initial complaint is “sufficiently adequate.”
Howey Test is ‘Flexible’ and ‘Adaptable,’ says SEC
The SEC refutes Coinbase’s claims that it is being blamed for its current predicament. It denies endorsing Coinbase’s previous conduct when it went public and argues that Chairman Gary Gensler’s responses in Congressional hearings do not apply to the court’s application of federal securities laws.
The SEC also asserts that the lawsuit should not have surprised Coinbase because it has “known all along that any crypto asset bought and sold on its trading platform is a security if it meets the Howey test.”
According to the agency, the Howey Test does not require an investment contract and its “flexible” and “adaptable” nature applies to crypto assets.
The Howey Test is a legal standard used in the United States to determine whether a particular asset is a security.
The SEC also argued that Coinbase’s stake service required investment of money for annual returns in a pool and by Coinbase, which it characterizes as a security.
“Old as Old” Response from Coinbase’s CEO
Coinbase’s Chief Legal Officer Paul Grewal responded publicly to the SEC’s opposition motion on Twitter, calling it “old as old” from the regulator.
The @SECgov just filed its opposition to our motion to dismiss their case against @Coinbase. It’s old as old. But don’t just take my word for it – take a look for yourself. 1/7
— Paul Grewal (@paulgrewal) October 3, 2023
Grewal asserted that tokens on Coinbase’s platform are not securities based on “Court decisions over the past several months,” referencing the SEC’s loss against Ripple and XRP’s securities case.
He also dismissed the SEC’s arguments, suggesting that its range from “Pokémon cards to stamps” could be considered securities under its definition, citing Representative Ritchie Torres’ questioning of Chairman Gensler in a House Financial Services Committee hearing.
Grewal mentioned that Coinbase is looking forward to filing its reply on October 24.
We look forward to filing our reply on October 24th. 7/7
Hot Take: SEC and Coinbase Continue Legal Battle Over Crypto Securities
The SEC has responded to Coinbase’s motion to dismiss its case, arguing that crypto assets listed on the exchange are securities if they meet the Howey test. Coinbase maintains that these assets are not investment contracts and that the SEC lacks authority over crypto transactions. The legal battle between the SEC and Coinbase continues, with both sides presenting their arguments. This case has significant implications for the regulation of cryptocurrencies in the United States and could set a precedent for how securities laws apply to digital assets.
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