In a motion for judgment filed on August 4, Coinbase hit back against the SEC’s lawsuit alleging it facilitated unregistered trading of securities, arguing the agency lacks authority to regulate digital assets in this way.
Coinbase Fights Back Against SEC’s Crypto Exchange Lawsuit
In a court filing submitted on Friday, Coinbase contends the SEC’s claims rely on an overbroad reading of the term “investment contract” that departs from decades of precedent and statutory text. The crypto-centric company says the SEC fails to allege the transactions facilitated on its exchange include any contractual rights entitling buyers to future profits or income from issuers, an essential element of an investment contract.
Today, @coinbase filed our brief asking the Court to dismiss the SEC’s case against us. Our core argument is simple — we do not offer "investment contracts" as that term has been construed by decades of Supreme Court and other binding precedent. 1/3 https://t.co/r2EkDgkEuc
— paulgrewal.eth (@iampaulgrewal) August 4, 2023
The motion asserts the SEC’s theory – that buyers of certain tokens expect profits based on issuer efforts to boost the tokens’ usefulness – impermissibly treats these assets like securities. Further, Coinbase invokes the major questions doctrine, under which courts defer substantial regulatory actions to Congress absent clear authorization.
Coinbase argues the SEC is claiming vast authority after admitting it lacks this power, even as legislators actively debate apportioning crypto oversight.
“The SEC has violated due process, abused its discretion, and abandoned its own earlier interpretations of the securities laws,” the court filing details. “But there is a more fundamental problem with its case—one the chair recognized two years ago and that entitles Coinbase to judgment on the pleadings now: The subject matter falls outside the agency’s delegated authority.”
Additionally, Coinbase contests the SEC’s claim it acted as an unregistered broker by providing its wallet software. Coinbase argues the wallet is merely a passive tool allowing users to store assets they control, not a means of effectuating transactions. The SEC’s allegation that Coinbase’s staking services are unregistered securities also fails, Coinbase’s lawyers claim. The company says Coinbase’s role in staking is merely technical, not managerial.
Overall, Coinbase paints the SEC’s action as an unjustified, dramatic reversal that defies the agency’s own past positions and comes amid ongoing legislative efforts to regulate digital assets. It urges the court to find the SEC transgressed its boundaries and dismiss the case.
“The SEC has overstepped its statutory authority, and the case should accordingly be dismissed,” Coinbase said. “For the foregoing reasons, Coinbase is entitled to judgment on the pleadings.”
What do you think about Coinbase asking the court to dismiss the SEC lawsuit? Share your thoughts and opinions about this subject in the comments section below.
