Coinbase Fights Back: Seeking Dismissal of SEC Lawsuit Over Crypto Regulation
Author: Alex Turner
- August 4, 2023
Coinbase (COIN), one of the leading crypto exchanges, has taken a bold step in its legal battle with the Securities and Exchange Commission (SEC). The company has filed a motion to dismiss the SEC’s lawsuit, arguing that the regulator is overstepping its authority by trying to regulate the cryptocurrency industry.
The SEC initiated the lawsuit in June, accusing Coinbase of violating federal securities laws for operating as an unregistered broker, exchange, and clearing agency for cryptocurrencies deemed as securities. The SEC pointed to 13 tokens as examples, claiming they met the requirements of investment contracts. However, Coinbase has challenged this claim, stating that the transactions on its platform are commodity sales and not investment contracts.
In support of its argument, Coinbase referred to a recent ruling in the SEC’s case against Ripple, where a federal judge determined that Ripple’s programmatic sales did not constitute securities transactions. Coinbase contended that its staking and wallet services should also be exempted from the SEC’s scrutiny.
The company also raised the “Major Questions Doctrine,” asserting that the SEC’s lawsuit would excessively expand its jurisdiction into the cryptocurrency industry.
To bolster its case, Coinbase submitted ten exhibits, including transcripts from a hearing involving the SEC’s case against LBRY and orders from previous cases related to the Howey Test. The Howey Test is a critical criterion used by regulators to ascertain whether a transaction qualifies as an investment contract.
The SEC has until October 3 to respond to Coinbase’s motion, and any supporting amicus briefs can be filed until August 11. During an earnings call, Coinbase’s Chief Legal Officer, Paul Grewal, expressed confidence in the company’s ability to win the case.
