Coinbase has filed a motion to dismiss a Securities and Exchange Commission lawsuit in which the agency accused the company of illegally running an unregistered national securities exchange, broker and clearing agency. Coinbase claims that, because it doesn’t deal in securities, the SEC has no authority over its operations.
“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,” Coinbase’s chief legal officer Paul Grewal wrote in a series of tweets. “By ignoring that precedent, the SEC has violated due process, abused its discretion and abandoned its own earlier interpretations of the securities laws. By ignoring that precedent, the SEC has trampled the strict boundaries on its basic authority set by Congress.”
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 SEC filed its lawsuit in June. It said Coinbase raked in billions of dollars since at least 2019 by “unlawfully facilitating the buying and selling of crypto asset securities.”
In its motion to dismiss, Coinbase cited a separate SEC case. A judge ruled in July that Ripple Labs’ XRP was not considered a security when sold on exchanges (though institutional sales of XRP fell under securities regulations, the judge determined).
However, that particular point may not work in Coinbase’s favor. This week, a different judge disagreed with the Ripple ruling and said the SEC could proceed with a case against Terraform Labs and its CEO Do Kwon. That includes claims involving sales made on exchanges and allegations of a multi-billion dollar fraud. As Bloomberg notes, neither the Ripple nor the Terraform suit is a controlling precedent in the Coinbase case.
Intriguingly, Coinbase has argued the cryptocurrencies that are sold on its platform are more like baseball cards than securities. It makes the case that baseball cards are commodities that people buy and sell in the hope they will grow in value.
Published at Fri, 04 Aug 2023 17:00:56 +0000