SEC calls Coinbase’s motion to dismiss arguments ‘flawed’

The filing attempts to paint Coinbase’s misinterpretation of securities laws, accusing the exchange of shifting blame to the SEC for its current legal woes

article-image

danielo/Shutterstock, modified by Blockworks

share

On Tuesday, the SEC targeted Coinbase’s bid to dismiss its case, heightening discord between the regulatory entity and the publicly listed crypto exchange.

Recent court documents show the SEC’s focus is on whether Coinbase facilitated transactions in “investment contracts” without necessary registration, violating federal securities laws.

Contradicting Coinbase’s assertion that its platform couldn’t enable “investment contracts,” the SEC highlighted the exchange’s stance as erroneous, pushing for the case to proceed.

It’s an argument the regulator has long pursued in an attempt to bring the industry to heel, echoing its previous filings against the exchange in June.

Coinbase filed a motion to dismiss two months later, claiming the “subject matter” of the lawsuit “falls outside of the agency’s delegated authority.” 

In an effort to secure a response, Coinbase referred Blockworks to posts on X, formerly Twitter, by the exchange’s Chief Legal Officer, Paul Grewal.

https://x.com/iampaulgrewal/status/1709317028035862626?s=20

Drawing upon a longstanding landmark decision, the SEC is grounding its case on the well-known “Howey test,” a metric for determining investment contracts.

Howey stipulates that a deal must include the investment of funds in a shared venture, anticipating gains from others’ efforts.

The counter-filing portrays Coinbase’s alleged misunderstanding of securities regulations, implying that the exchange is redirecting blame towards the SEC for its ongoing legal challenges.

In its Tuesday response, the SEC contends Coinbase recognized, since 2016, the possibility of digital assets on its platform being designated as securities in relation to the Howey criteria.

The oversight body suggests that token producers influenced investors to anticipate an increase in asset values which Coinbase facilitated.

“This lawsuit cannot really come as a surprise to Coinbase. It has known all along that a crypto asset bought and sold on its trading platform is a security if it meets the Howey test,” the SEC said.

The commission also dismissed Coinbase’s attempt to leverage public statements by SEC Chair Gary Gensler, deeming his remarks as unrelated to the case’s legal standing.

“[The motion to dismiss] contends the SEC blessed Coinbase’s violative conduct when Coinbase went public, that SEC Chair Gary Gensler’s answer to a question at a Congressional hearing (which Coinbase distorts) controls this Court’s application of the federal securities laws.”

The SEC did not immediately respond to Blockworks’ request for comment.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Screenshot 2024-05-23 091855.png

Research

Bitcoin L2s aim to boost scalability while preserving decentralization and security, unlocking a better user experience, and new avenues for Bitcoin-powered innovations. However, no existing Bitcoin L2 leverages the full security of Bitcoin.

article-image

Also, toncoin could be crypto’s next blue-chip token

article-image

I believe that the innovation happening on Bitcoin right now is what will ultimately lead to a better Bitcoin for everyone

article-image

The payments firm is exploring PYUSD’s payments use cases

article-image

Planned funds would not stake their holdings, which some say will hurt the ETFs’ appeal for certain investors

article-image

Solana validators voted in favor of a proposal that would send 100% of priority fees to validators

article-image

In November, an iteration of the survey found that 34% of respondents were paying attention to crypto, but that figure has since jumped to 41%