March 27, 2024
Latest Cryptocurrency News

Coinbase Challenges SEC’s Authority in Ongoing Legal Battle

Cryptocurrency exchange Coinbase has submitted a motion to dismiss the complaint filed by the United States Securities and Exchange Commission (SEC) in their ongoing legal battle.

In a legal filing made on June 29, Coinbase expressed concerns about the SEC’s interpretation of securities laws, suggesting that the agency was overstepping its legal boundaries.

This action by Coinbase highlights its determination to challenge the SEC’s lawsuit. According to the motion to dismiss, even if the allegations in the lawsuit are true, the plaintiff lacks a valid legal basis for their claims. Coinbase’s legal team stated in the filing:

“Even if the SEC were correct that the assets and services it identifies are within the scope of its existing regulatory authority, this legal action must be dismissed on independent grounds that it violates Coinbase’s due process rights and constitutes an extraordinary abuse of process.”

The SEC’s lawsuit accused Coinbase of facilitating unregistered trading of 12 digital tokens classified as securities. However, Coinbase has contested this accusation and argued that the SEC’s application of securities laws to certain digital tokens deviates significantly from established legal frameworks. Paul Grewal, Coinbase’s chief legal officer, tweeted on June 29 that the SEC’s claims “go far beyond existing law” and should, therefore, be dismissed.

According to the SEC, the definition of a security includes investment contracts, as interpreted by the Supreme Court in the Howey Test. This definition encompasses transactions where individuals invest money in a common enterprise and expect profits primarily from the efforts of others. In their lawsuit, the SEC identified 12 crypto tokens, including Solana (SOL), Cardano (ADA), Polygon (MATIC), The Sandbox (SAND), Flow (FLOW), Internet Computer (ICP), Near (NEAR), and Dash (DASH), as securities.

Coinbase’s lawyers further argued that in 2021, the SEC deemed the company’s registration statement effective, allowing Coinbase to publicly sell its shares to investors. This approval came after an extensive review process that lasted several months and involved detailed discussions with Coinbase. As a result, Coinbase was able to list over 240 tokens on its spot exchange, including six of the 12 tokens currently in dispute.

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