Coinbase, the largest US crypto-asset exchange, has filed a petition to dismiss the US Securities and Exchange Commission (SEC) lawsuit filed against it, according to a tweet by the company’s chief legal officer, Paul Grewal. Here are the details…
New development in Coinbase and SEC lawsuit
The SEC’s lawsuit alleges that Coinbase must be registered as a stock exchange, broker, and clearinghouse under federal securities laws, and the firm vehemently denies that accusation. Grewal tweeted:
We are always welcome to engage in dialogue with any regulatory body, including the SEC, and we believe new legislation and rulemaking is the right way forward. However, the allegations in this case go far beyond existing law and should be rejected.
Coinbase argues in its motion that the SEC’s stance is inconsistent and goes against previous memoranda between the two entities. In its first legal response to the regulator’s lawsuit, US crypto exchange Coinbase claimed that crypto assets listed on its platform fall outside the jurisdiction of the US Securities and Exchange Commission (SEC). The SEC sued Coinbase in early June, claiming that a dozen cryptocurrencies offered through its wallet or trading platforms are unregistered securities. In its response earlier on Thursday, Coinbase claimed that these cryptos are not investment contracts and therefore not securities.
New document has new details
That’s an argument Coinbase has previously made in public statements such as tweets and blog posts, but Thursday’s documents go into more detail explaining the company’s position. According to the details, cryptos on the exchange’s secondary market platform are not part of any arrangement in which a backer sells a contractual asset, the company claimed, essentially citing the Supreme Court’s Howey case as an example. The filing stated that issuers of the tokens have no obligations to investors. The following statements were included:
Transactions are not securities, as transactions made through Coinbase’s secondary market exchange do not carry such obligations, and the value that Coinbase buyers derive through these transactions is specific to what is bought and traded rather than to the businesses that produce them.
Part of the filing continues to echo Coinbase’s already lively public statements, arguing that it changed its stance on the regulator’s authority over crypto between mid-2022 when current SEC Chairman Gary Gensler took office in April 2021; He says the company wants regulation and states that Congress is starting to look into the issue of crypto regulation. The documents claimed that the SEC “chosen” to pursue sanctions rather than rule-making.
The remainder of the file contains a pinpoint response to the SEC’s case. In a separate document submitted to the presiding judge, Coinbase claimed that its due process rights were violated when the SEC sued, and that the SEC’s case may violate the “significant questions” doctrine. The company asked the judge to allow it to sue and set a 7-week timetable for the request, the SEC’s appeal, and its own response to the appeal.
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