In response to the Securities and Exchange Commission’s (SEC) lawsuit filed against Coinbase, the prominent U.S. cryptocurrency exchange has submitted its first legal response, arguing that the digital assets listed on its platform are not subject to the jurisdiction of the regulatory body.
The SEC’s lawsuit, initiated on June 6, alleged that certain cryptocurrencies offered by Coinbase were unregistered securities. However, Coinbase’s response rebuts this claim, asserting that these cryptocurrencies do not qualify as investment contracts and should, therefore, not be categorized as securities.
Elaborating on its stance, Coinbase’s filing clarifies that the cryptocurrencies traded on its secondary market platform do not involve arrangements where a promoter sells an asset tied to a contract. Drawing on the Supreme Court’s Howey case as an example, Coinbase highlights that the token issuers do not hold any obligations towards investors. Thus, Coinbase argues that as its exchange transactions do not involve securities, they should not be treated as securities transactions.
Furthermore, the filing underlines previous public statements made by Coinbase, emphasizing that the current SEC Chair, Gary Gensler, altered his position on the regulator’s authority over cryptocurrencies upon assuming office.
Coinbase also underscores its willingness to operate within a regulated framework and its requests for guidance from the SEC regarding the application of securities laws to the digital asset industry. Additionally, the filing alleges that the SEC’s actions not only violate Coinbase’s due process rights but also constitute an abuse of process.
In its defense, Coinbase asserts its compliance with regulations imposed by various regulatory bodies, adherence to limited formal guidance from the SEC, senior SEC Staff, and the courts, as well as its proactive efforts to seek clarification from the SEC regarding the application of federal securities laws to the digital asset industry.
The company argues that the SEC’s choice to pursue enforcement actions rather than rulemaking reflects an undisclosed shift in the regulator’s perspective on its own authority.
Coinbase’s legal response challenges the SEC’s jurisdiction and maintains that the cryptocurrencies listed on its platform should not be classified as securities. As the lawsuit response unfolds, it sets the stage for a potential legal battle between Coinbase and the SEC, as both entities navigate the evolving regulatory landscape surrounding cryptocurrencies.
Compiled by Coinbold