Key takeaways:
- Coinbase requests dismissal of SEC case, claiming regulatory overreach.
- Crypto exchange asserts SEC lawsuit surpasses jurisdictional boundaries.
Coinbase, a prominent cryptocurrency exchange based in the United States, is making a stand against the Securities and Exchange Commission (SEC) by filing a motion to dismiss a lawsuit that the regulatory body initiated in June.
In a recent legal filing submitted on August 4th to the U.S. District Court for the Southern District of New York, Coinbase’s legal representatives have submitted a motion for judgment.
They argue that the SEC’s actions represent a violation of due process, an abuse of discretion, and a departure from its own previous interpretations of securities laws.
The SEC’s lawsuit had alleged that Coinbase, through its operations, had breached securities laws by engaging as an unregistered broker, exchange, and clearing agency.
Additionally, the commission accused the exchange of selling unregistered securities via its staking-as-a-service program, which incentivizes users with cryptocurrency rewards for participating in blockchain’s proof-of-stake process.
Countering the SEC’s assertions, Coinbase vehemently rejects their claims, asserting that the case exists beyond the agency’s authorized jurisdiction.
This position is based on Coinbase’s consistent contention that it does not deal in securities. This perspective is not new, as Paul Grewal, the Chief Legal Officer of the company, stated firmly last year, “Coinbase does not list securities. End of story.”
As the legal battle ensues, the outcome could have significant implications for the regulatory landscape surrounding cryptocurrencies.
Coinbase’s stance reflects a broader debate within the cryptocurrency industry about the appropriate regulatory framework, as well as the potential ramifications for innovation and market participation.
The court’s decision will likely influence how the industry interacts with regulatory authorities and may set precedents for similar cases in the future.
Coinbase also referred back to the “Major Questions Doctrine,” which it highlighted in a prior filing, claiming that the litigation would significantly broaden the regulator’s power to cover the bitcoin business.
Coinbase’s application included ten exhibits, including transcripts from a hearing in the SEC’s action against LBRY and orders from earlier instances involving Howey Test questions. The Howey Test is a 1946 Supreme Court precedent that regulators can apply to assess what constitutes an investment contract.
The SEC has until October 3 to respond to Coinbase’s motion, and any amicus papers in support of Coinbase can be filed until August 11.
