The SEC Rejects Coinbase’s Motion to Dismiss Lawsuit
The Securities and Exchange Commission (SEC) has asked a federal judge to deny Coinbase’s motion to dismiss the lawsuit filed against it. The SEC accused the cryptocurrency exchange of offering unregistered securities, operating as a clearing agency, broker, and national securities exchange without proper registration approval. Coinbase had argued that the SEC lacked jurisdiction because its services and digital assets did not qualify as securities. However, the SEC countered this argument by stating that Coinbase did indeed carry out the functions of an exchange, broker, and clearing agency. The SEC believes that some cryptocurrencies listed on Coinbase meet the criteria of the Howey test and should be considered investment contracts subject to registration.
SEC Accuses Coinbase of Awareness
The SEC alleges that Coinbase has been aware of the classification of certain crypto assets as securities. It claims that Coinbase recognized this classification on its website as far back as 2016 and in its filings with the SEC. The agency argues that Coinbase encouraged investors to expect an increase in the value of their investments based on the issuer’s plans to develop and maintain the asset’s value. The SEC believes that Coinbase knowingly facilitated transactions involving investment contracts and securities.
Coinbase’s Response
Coinbase challenged the SEC’s authority by referring to the “major questions doctrine,” which suggests that the SEC lacks the power to regulate the cryptocurrency market without specific authorization from Congress. However, the SEC dismissed this argument, stating that it has not assumed any new powers beyond what is already authorized by federal securities laws. Coinbase’s Chief Legal Officer expressed dissatisfaction with the SEC’s filing, claiming that it lacked legal citation and arguing that the assets listed on Coinbase’s platform are not securities and do not fall under the SEC’s jurisdiction.
Industry Reaction
Crypto general counsel at a16z, Miles Jennings, criticized the SEC’s arguments and highlighted perceived weaknesses in its case against Coinbase. He questioned the SEC’s definition of an investment contract for its “endless breadth.” Jennings believes that even if the court were to accept the SEC’s main contention that investment contracts don’t require legal contracts, the SEC’s case should still fail. Coinbase plans to file a response on October 24.
Hot Take: SEC vs. Coinbase Lawsuit Continues
The legal battle between the SEC and Coinbase continues as the regulatory agency rejects Coinbase’s motion to dismiss the lawsuit. The SEC maintains that some cryptocurrencies listed on Coinbase meet the criteria of investment contracts and should be registered as securities. Coinbase argues that these assets are not securities and fall outside of the SEC’s jurisdiction. As industry experts weigh in on the case, it remains to be seen how this legal showdown will impact the broader cryptocurrency market and regulations surrounding it.
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