SEC vs. Coinbase: Legal Battle Unveiled
The United States Securities and Exchange Commission has urged a federal judge to reject Coinbase's request to dismiss a lawsuit by the regulator.
In a filing made on October 3rd in a New York District Court, the SEC strongly opposed the assertions made in Coinbase's motion for dismissal and reiterated its stance that certain cryptocurrencies featured on its platform should be classified as investment contracts, subject to SEC registration, based on the Howey Test.
The SEC emphasized that each issuer of crypto assets encouraged investors, including those making purchases on Coinbase's platform, to reasonably anticipate an increase in the value of their investments, as outlined in the issuer's broadly disseminated plan for the development and maintenance of the asset's value.
The SEC insisted that Coinbase had been well aware from the beginning that the cryptocurrencies it vends would be considered securities if they satisfied the Howey Test, citing the exchange's acknowledgment of this in its submissions to the SEC.
Moreover, the regulator refuted Coinbase's argument invoking the "major questions doctrine," contending that the SEC does indeed possess authority over the crypto market, a prerogative that does not necessitate further validation from Congress.
"The SEC has not newly empowered itself to undertake actions beyond what the federal securities laws explicitly authorize," the SEC stated.
In a Twitter post dated October 3rd, Coinbase's legal chief, Paul Grewal, downplayed the significance of the SEC's arguments, characterizing them as "repetitive" and asserting that the listed assets "do not qualify as securities and are outside the purview of the SEC."
The @SECgov just filed its opposition to our motion to dismiss their case against @Coinbase. It’s more of the same old same old. But don’t just take my word for it – take a look for yourself. 1/7 https://t.co/QMdkRoiq0V— paulgrewal.eth (@iampaulgrewal) October 3, 2023
Grewal argued that the SEC's stance, if accepted, would imply that "everything from Pokemon cards to stamps to Swiftie bracelets" would also fall under the securities category.
Miles Jennings, general counsel for a16z crypto, contested the validity of the SEC's motion in a separate post, pointing out numerous deficiencies.
The SEC's opposition to @coinbase's motion has a lot of holes. Even if the court were to agree with the SEC's main contention (that investment contracts don't require legal contracts), the SEC's case should still fail.— miles jennings (@milesjennings) October 3, 2023
As we discussed in our brief in August, the SEC's theory of… https://t.co/RTzlutSM9t
Jennings added that even if the court were to align with the regulator's primary argument concerning investment contracts, he believed the case would still not hold up, as he perceived the SEC's definition of an investment contract to be excessively broad.
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