Coinbase made its final attempt to get the lawsuit filed by the SEC dismissed. The crypto exchange argued the agency is acting beyond its scope by trying to control all investment activity and extending its definition of what qualifies as a security too wide.
Cryptocurrency exchange Coinbase is taking the US Securities and Exchange Commission on again. On Tuesday, in a filing made in a New York District Court, Coinbase submitted its final arguments to try dismissing the lawsuit filed by the SEC.
Coinbase: SEC’s Definition of a Security is Too Wide
The SEC sued Coinbase in June, alleging it acted as an unregistered broker and exchange.
In its arguments, the exchange challenged the securities agency and stated its definition of what constitutes a security is far too broad. Coinbase further argued the cryptocurrencies it lists are not under the SEC’s purview.
Coinbase’s arguments read as follows:
“The SEC’s authority is limited to securities transactions. Not every parting of capital with a hope of gain qualifies, and trades over Coinbase are only securities transactions if they involve ‘investment contracts.’ The transactions at issue here do not.”
It further stated:
“As the SEC now would have it, an investment contract exists if someone parts with capital and expecting that her purchase will increase in value.”
“Radical Expansion of its Own Authority”
Coinbase took the securities agency on by claiming it was acting beyond its scope by trying to exert control over all investment activity.
The exchange states the SEC is attempting a “radical expansion of its own authority” and extended its jurisdiction “over essentially all investment activity”, which only Congress has the authority to do.
Coinbase chief legal officer Paul Grewal supported the exchange’s claims and said the SEC’s definition of securities has “no limiting function at all.”
The @SECGov's opp. to our motion for judgment claims roving authority over all investments, with “security” and “contract” in the statutes performing no limiting function at all. As our reply shows, that's never been the law, and it's not the law now. 1/3 https://t.co/gVFyrJ8oIq
— paulgrewal.eth (@iampaulgrewal) October 24, 2023
The exchange supported its claims by stating:
“Were the SEC’s position accepted, countless software-driven services would be securities. That would be another radical expansion of SEC authority with no grounding in precedent.”
The SEC and Coinbase’s Never-Ending Battle
Regulatory disagreement between the SEC and Coinbase has been going on for some time.
Following the lawsuit the SEC instituted in June, Coinbase moved to dismiss all cases started by the agency.
In its initial motion seeking dismissal, Coinbase said:
“The transactions over Coinbase’s platform and Prime are not, and do not involve, contractual undertakings to deliver future value reflecting the income, profits, or assets of a business. They are commodity sales, with the obligations on both sides discharged entirely the moment the digital token is delivered in exchange for payment.”
It was later revealed the SEC requested that Coinbase delist every asset except Bitcoin from its exchange. Coinbase declined to comply with the request.
Coinbase CEO Brian Armstrong explained why the exchange could not do so:
“We really didn’t [did not] have a choice at that point; delisting every asset other than Bitcoin, which by the way, is not what the law says, would have essentially meant the end of the crypto industry in the US. It kind of made it an easy choice… let’s [let us] go to court and find out what the court says.”
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