Coinbase
Coinbase

Coinbase seeks SEC lawsuit dismissal, asserting non-involvement with Securities

What To Know

  • Coinbase has taken action to dismiss a lawsuit filed by the Securities and Exchange Commission (SEC), which accused the company of operating an unregistered national securities exchange, broker, and clearing agency in violation of the law.
  • According to Grewal, the SEC’s disregard for these precedents constitutes a violation of due process, an abuse of discretion, and an abandonment of its own earlier interpretations of securities laws.
  • The SEC initiated the lawsuit against Coinbase in June, alleging that the company unlawfully facilitated the buying and selling of crypto asset securities and generated substantial revenue since 2019.
  • However, this argument may not favor Coinbase as another judge recently disagreed with the Ripple ruling, allowing the SEC to proceed with a case against Terraform Labs and its CEO Do Kwon.

Coinbase has taken action to dismiss a lawsuit filed by the Securities and Exchange Commission (SEC), which accused the company of operating an unregistered national securities exchange, broker, and clearing agency in violation of the law. The company asserts that it does not deal in securities, thereby challenging the SEC’s authority over its operations.

The company’s chief legal officer, Paul Grewal, expressed the company’s core argument via a series of tweets, stating that they do not offer “investment contracts” as defined by well-established Supreme Court and binding precedents.

According to Grewal, the SEC’s disregard for these precedents constitutes a violation of due process, an abuse of discretion, and an abandonment of its own earlier interpretations of securities laws. He believes the SEC has exceeded the boundaries of its authority set by Congress.

The SEC initiated the lawsuit against Coinbase in June, alleging that the company unlawfully facilitated the buying and selling of crypto asset securities and generated substantial revenue since 2019.

Coinbase’s motion to dismiss references a separate SEC case involving Ripple Labs’ XRP. In July, a judge ruled that XRP was not considered a security when traded on exchanges, although institutional sales of XRP were subject to securities regulations. However, this argument may not favor Coinbase as another judge recently disagreed with the Ripple ruling, allowing the SEC to proceed with a case against Terraform Labs and its CEO Do Kwon.

This case involves claims related to sales made on exchanges and allegations of a multi-billion dollar fraud. It’s worth noting that neither the Ripple nor the Terraform suit serves as a controlling precedent in the Coinbase case.

Interestingly, Coinbase contends that the cryptocurrencies sold on its platform are more akin to commodities like baseball cards rather than securities. The company argues that people buy and sell these assets with the hope of their value appreciating, much like collecting and trading baseball cards.

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