The U.S. SEC has filed a motion to deny Coinbase’s request to dismiss the lawsuit that accuses the cryptocurrency exchange of violating federal securities laws. The SEC claims that Coinbase knowingly offered and sold digital assets that qualify as securities without registering them with the regulator.
The SEC argues that these assets, including some of the cryptocurrencies listed on Coinbase, meet the criteria of the Howey Test, which determines whether an asset is a security based on the anticipation of earnings from the actions of others. It also alleges that Coinbase was aware of this classification and even acknowledged it in its communications with the regulator.
The SEC Continues to Apply Pressure on Coinbase
The SEC also asserts that Coinbase failed to disclose material information to its customers, such as the risks and fees associated with these assets. Coinbase, on the other hand, maintains that the assets it offers are not securities and fall outside the SEC’s jurisdiction.
Coinbase has also challenged the SEC’s authority over the crypto market, invoking the “major questions doctrine,” which states that Congress must explicitly grant new powers to an agency before it can regulate a novel area.
However, the SEC has rejected this argument, stating that it is not seeking any new powers beyond what the federal securities laws already allow it to do. The SEC has also accused Coinbase of trying to evade its oversight and responsibility by claiming that crypto is a new and unregulated industry.
Coinbase’s legal chief, Paul Grewal, has responded to the SEC’s motion on Twitter, calling it “more of the same old same old.” He has also ridiculed the SEC’s application of the Howey Test, suggesting that items like Pokemon cards, stamps, and Swiftie bracelets could also be considered securities by the same logic.
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
The lawsuit between the SEC and Coinbase is one of the most high-profile cases in the crypto space, as it could have significant implications for the future of regulation and innovation in the industry. A federal judge will decide whether to grant or deny Coinbase’s motion to dismiss in the coming weeks.