Coinbase Accuses SEC of Overreach in Cryptocurrency Classification Dispute
Summary:
Coinbase has accused the SEC of overstepping its jurisdiction by categorizing listed cryptocurrencies as securities. In a recent filing, Coinbase criticised the SEC's broad definition of securities, arguing that the transactions in question do not fit this criterion. The company also alleged the SEC of trying to expand its authority to regulate investment activities, a power that Coinbase argues is primarily reserved for Congress. This filing comes in response to the SEC's request to dismiss Coinbase's call for dismissal in their ongoing legal battle.
In its ongoing legal battle against the Securities and Exchange Commission (SEC), Coinbase has alleged that the financial watchdog has exceeded its jurisdiction by categorizing cryptocurrencies listed on its platform as securities. Submitting its most recent argument on October 24 in a New York District Court, Coinbase lambasted the SEC for an overreaching definition of a security, asserting that the digital currencies it offers do not fall within the regulatory body's scope.
Coinbase argued, "The right to regulate securities is conferred to the SEC only to an extent. Not every transfer of capital with potential profit falls within this jurisdiction, and transactions carried out over Coinbase can only be treated as security dealings if 'investment contracts' are involved. The transactions presently under question do not satisfy this criterion."
Moreover, Coinbase accused the SEC of "attempting an unchecked expansion of its powers," and infringing on areas "primarily reserved for the legislative action of Congress," according to major questions doctrine. On October 24, Paul Grewal, Coinbase's Chief Legal Officer, reiterated these assertions in a post, criticizing the SEC's "unbounded" definitions.
By taking the stand that any purchase harboring expectations of profit appreciation counts as an investment contract, and hence a security, the SEC is perceived by Coinbase as seeking to overstretch its regulatory powers. Grewal emphasized that only the Congress has the authority to undertake such actions, in line with the major questions doctrine.
Coinbase's recent legal memorandum is a response to the SEC's October 3 retort, which urged the court to dismiss Coinbase's previous call for the case's dismissal. The SEC maintained its stand, arguing that multiple digital assets listed on Coinbase constitute investment contracts under the Howey test.
The SEC initiated the legal battle against Coinbase on June 6, accusing the cryptocurrency exchange of failing to adhere to U.S. securities laws by offering various digital tokens deemed as securities without necessary registration. The motion for judgment was put forward by Coinbase on June 29, accusing the SEC of abusing its authority and infringing on Coinbase's right to due process. The presiding judge, Katherine Polk Failla, may require both parties to appear in court for verbal arguments before making her decision on either dismissing the case, issuing a verdict, or bringing the case in front of a jury.
Published At
10/25/2023 5:49:59 AM
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