NASAA Supports SEC in Coinbase Lawsuit, Argues Digital Assets Are Not 'Special'
Summary:
The North American Securities Administrators Association (NASAA) supports the US Securities and Exchange Commission (SEC) in its lawsuit against Coinbase, arguing that digital assets should not be treated differently from other forms of securities. NASAA's stance was highlighted in a court filing wherein it was argued that the treatment of digital assets under securities law is neither novel nor extraordinary. This legal case is anticipated to rely heavily on the interpretation of the Howey test, a tool utilized to ascertain what constitutes an investment contract. The NASAA, SEC, and Coinbase have differing interpretations of the test's applicability to digital assets.
An association of North American securities regulators, the North American Securities Administrators Association (NASAA), has contended that digital assets should not be considered "somehow special" and any action taken against Coinbase cannot be deemed as "novel or extraordinary". They expressed this viewpoint in a New York District Court filing on October 10, in support of the United States Securities and Exchange Commission.
In the middle of the year, Coinbase was sued by the SEC under claims of federal securities laws breach. Coinbase retaliated, stating that the digital assets and provided services do not meet the criteria of securities, and accused the SEC of excessiveness. Nonetheless, NASAA's general counsel Vincente Martinez insisted that the situation is neither novel nor extraordinary and that it aligns with the consistent public viewpoint of the SEC.
The regulators maintain that it’s not required for the SEC to procure explicit Congressional permission prior to applying pre-set law to digital assets. The crux of the lawsuit is anticipated to hinge on the judge's interpretation of the Howey test — a tool utilized to ascertain what constitutes an investment contract.
Coinbase has argued that digital assets do not fulfill all components of the test. However, Martinez refutes this, stating that the Howey test has the flexibility to include a wide array of advancements in securities technologies, including securities that are traded and sold on blockchains — an argument that mirrors the SEC's previous stance.
In addition, Martinez criticized Coinbase’s calling into question the "major questions doctrine", which suggests that executive agencies such as the SEC need Congressional consent for matters of major economic or political importance.
Nevertheless, Martinez asserted that digital assets can't be viewed as a significant part of the American economy due to the lack of practical use case or widespread adoption, aside from speculation. He stated that such assets are not generally accepted as a form of payment for services or goods or to fulfill government obligations such as taxes or fees.
In conclusion, NASAA joined SEC in asking the judge not to agree to Coinbase’s bid to have the SEC lawsuit dismissed. This submission was made under the leadership of NASAA President Claire McHenry. NASAA, which consists of 68 members, including securities regulators from all 50 U.S. states as well as regulators in Canada, Mexico and several U.S. territories, has a substantial interest in this case.
Published At
10/11/2023 6:08:31 AM
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