- According to Coinbase, the tokens listed on its platform aren’t securities.
- It emphasized that the SEC was beyond its jurisdiction in its enforcement action.
Coinbase, the largest crypto exchange in the U.S., has once again pushed back against the accusations put forth by the Securities and Exchange Commission (SEC).
It again argued in its latest and final filing in the New York District Court that the court should dismiss the SEC’s lawsuit.
The exchange’s filing is in response to the regulator’s filing from earlier this month. The SEC had then urged the judge to reject Coinbase’s motion to dismiss the suit.
Coinbase has again put forward two major arguments as earlier: the tokens listed on its platform aren’t securities, and the SEC was beyond its jurisdiction in its enforcement action against the exchange.
Can crypto assets be considered securities under the Howey Test?
According to the SEC, crypto asset issuers, including those listed on Coinbase, encouraged investors to expect the value of their investments to rise based on the issuers’ plans to develop and maintain the asset’s value. It meant that Coinbase was aware and cognizant of the fact that certain cryptocurrencies it offered were indeed securities.
Coinbase has argued against it, underlining a lack of contractual commitment between token sellers and buyers. A contractual commitment is a critical component of an investment contract under the Howey Test, as per the Supreme Court.
It didn’t exist in its crypto asset offerings, Coinbase argued.
Is the SEC violating the Major Questions Doctrine?
Coinbase also reiterated that the SEC had overstepped its regulatory jurisdiction in its enforcement against the exchange. It cited the Major Questions Doctrine to argue that the SEC had assumed powers not conferred to it by the Congress.
Under the doctrine, the Congress doesn’t delegate to executive agencies questions of major political or economic significance. Crypto is a major question that the Congress—not the SEC—should handle, Coinbase claimed.
The SEC had denied this claim also in its last filing, arguing it hadn’t assumed any new powers beyond what the federal securities laws already permitted.
To cut to the chase, Coinbase reiterated its charge against SEC’s so-called “regulation by enforcement” approach towards crypto. On the other hand, the SEC argued that there was no need for additional laws around crypto regulation. Existing securities laws were sufficient to regulate crypto.
The SEC first sued Coinbase in June for allegedly offering unregistered securities. The exchange soon filed a motion to dismiss the suit. Meanwhile, Coinbase has been pressing the SEC to respond to its crypto rulemaking petition.
The fate of the case would have significant implications for the crypto industry in the U.S. and beyond.
