Per a Reuters report, the US Securities and Exchange Commission (SEC) has urged a federal judge to reject Coinbase’s motion to dismiss the regulator’s lawsuit against the prominent cryptocurrency exchange.
The SEC’s action disputes Coinbase’s reliance on a recent court ruling involving Ripple Labs, emphasizing a subsequent ruling in the Terraform Labs case that differs in reasoning.
Coinbase Role As Exchange Under Scrutiny
The SEC’s filing on Tuesday highlights the agency’s intent to leverage the Terraform Labs ruling to raise questions about the court’s decision in the Ripple case, a victory widely celebrated by the crypto industry.
In June, the SEC initially sued Coinbase, alleging that the exchange operated unlawfully as a national securities exchange, broker, and clearing agency without proper registration.
In response, Coinbase sought the dismissal of the case in August, contending that the SEC lacked jurisdiction in pursuing the lawsuit since the digital assets and services in question did not meet the criteria for securities.
In its filing, the SEC stated that apart from the Wallet application, Coinbase did not dispute its role as an exchange, broker, and clearing agency.
The agency argues that the crypto exchange facilitated transactions involving investment “contracts and securities,” asserting that each crypto asset issuer enticed investors, including purchasers on Coinbase’s platform, with the reasonable expectation of increasing the value of their investment based on the issuer’s widely disseminated plan to develop and maintain the asset’s value.
The SEC also claimed that the firm has been aware that its selling cryptocurrencies may qualify as securities under the Howey test, as evident from its filings with the SEC.
Coinbase’s CLO Counters Regulatory Reach With Pokemon Card Comparison
Coinbase’s Chief Legal Officer, Paul Grewal, responded to the SEC’s filing via ‘X’ (formerly Twitter), dismissing it as “more of the same old same old.”
Grewal further asserted that the SEC’s arguments imply that other items, such as Pokemon cards, stamps, and Swiftie bracelets, could be deemed securities. Coinbase’s CLO claimed:
The SEC’s arguments today would mean that everything from Pokemon cards to stamps to Swiftie bracelets are also securities.
Grewal maintained that the assets listed on Coinbase’s platform are not securities and fall outside the SEC’s jurisdiction.
Furthermore, Grewal emphasized that recent court decisions have clarified this distinction and criticized the SEC’s enforcement-focused regulatory approach, which he believes disregards the opinions of the expansive 52-million-strong crypto community in the United States that seeks clear rules and regulations for this innovative technology.
As the case unfolds, the outcome will likely have far-reaching implications for the industry, influencing how digital asset platforms operate and comply with securities laws.
Featured image from Shutterstock, chart from TradingView.com