Coinbase has asked a judge to scrap the U.S. Securities and Exchange Commission lawsuit against the cryptocurrency exchange.
The San Francisco-based exchange said in a federal filing Friday that the SEC’s “claims must be dismissed” because “the subject matter falls outside the agency’s delegated authority.”
The SEC in June hit America’s biggest digital asset exchange with a lawsuit, alleging that it operated for years as an unlicensed securities exchange.
Coinbase is now arguing that none of the digital assets and services it offers do not qualify as securities.“Because as a matter of law none of them [digital assets] are, the claims must be dismissed,” the filing said.
Coinbase Chief Legal Officer Paul Grewal said on Twitter Friday that the “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.”
“By ignoring that precedent, the SEC has violated due process, abused its discretion, and abandoned its own earlier interpretations of the securities laws,” he wrote.
The SEC’s lawsuit alleges that Coinbase operated as an unregistered national securities exchange, broker and clearing agency for years and “elevated its interest in increasing its profits over investors’ interests.”
Wall Street’s top regulator also alleges that Coinbase offered and sold unregistered securities via its staking service.
Coinbase Chief Legal Officer Paul Grewal discussed the "Howey Test," which the SEC uses as its yard stick for whether a crypto asset should be regulated as a security, and told Decrypt's Stacy Elliott and Dan Roberts the issue with it isn't that it's old (the case is from 1946) but how it's being applied to modern technology. Watch and make sure to subscribe to the gm podcast on Apple or Spotify.
The SEC this year has intensified its crackdown on the cryptocurrency industry. This is largely in part because its Chairman Gary Gensler claims that many major crypto brands—mostly exchanges—are selling unregistered securities.
Nearly five years ago, SEC official Bill Himan stood on stage at a Yahoo Finance crypto summit in San Francisco and delivered a prepared speech that concluded that Ethereum (ETH) is not a security. A footnote on the SEC's website clarified that the speech "expresses the author’s views and does not necessarily reflect those of the Commission," but it was nonetheless taken exactly that way.
Hinman's speech came just one week after then-SEC chair Jay Clayton said that the SEC does not view Bitcoin...
Under his watch, the regulator has sued Kraken, gone after Binance and its sister company Binance US and hit Genesis with a lawsuit.
Binance, the world’s biggest crypto company, has sought dismissal of one of its many lawsuits, last week accusing the United States Commodity Futures Trading Commission (CFTC) of overreach. It has yet to dismiss the SEC’s complaint.
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