In an ongoing legal battle with the United States Securities and Exchange Commission (SEC), Coinbase has made its final plea to dismiss the lawsuit. The cryptocurrency exchange contends that the SEC’s classification of Coinbase-listed cryptocurrencies as securities exceeds the regulator’s jurisdiction.
Disagreement on Securities Classification
Coinbase‘s objection centers on the SEC’s expansive definition of what constitutes a security. The exchange argues that the SEC’s interpretation is overly broad and that the cryptocurrencies it lists should not fall under the SEC’s regulatory purview. According to Coinbase, the SEC‘s authority is confined to overseeing securities transactions, and not every financial transaction that carries the potential for profit should be considered a security. In Coinbase‘s view, transactions occurring on its platform are only categorized as securities transactions if they involve “investment contracts.”
Expanding Authority and Legal Challenge
Coinbase further accuses the SEC of embarking on a “radical expansion” of its own authority, effectively asserting jurisdiction over a wide array of investment activities. Coinbase argues that such an extension of authority can only be legitimately undertaken by Congress, invoking the major questions doctrine.
The @SECGov‘s opp. to our motion for judgment claims roving authority over all investments, with “security” and “contract” in the statutes performing no limiting function at all. As our reply shows, that’s never been the law, and it’s not the law now. 1/3 https://t.co/gVFyrJ8oIq
— paulgrewal.eth (@iampaulgrewal) October 24, 2023
Paul Grewal, Coinbase‘s Chief Legal Officer, reiterated these claims, asserting that the SEC’s definitions lack a limiting function. The exchange’s recent legal filing is in response to the SEC‘s earlier rebuttal on October 3, in which the SEC maintained its position that various cryptocurrencies listed on Coinbase should be considered investment contracts under the Howey test.
Background of the Lawsuit
The SEC initiated the lawsuit against Coinbase on June 6, alleging that the exchange had violated U.S. securities laws by listing several tokens it deemed to be securities without registering with the regulatory authority. Coinbase had filed a motion for judgment on June 29, contending that the SEC was abusing its power and infringing upon Coinbase‘s due process rights.
The case is currently under the jurisdiction of Judge Katherine Polk Failla, who may opt to call Coinbase and the SEC for oral arguments and subsequently make a judgment to either dismiss the case or proceed with a trial before a jury.