SEC Asks Judge to Deny Coinbase's Lawsuit Dismissal Request Amid Investment Contract Controversy
Summary:
The United States Securities and Exchange Commission (SEC) has asked a federal judge to deny Coinbase's dismissal request for a lawsuit brought by the SEC. The commission values certain cryptocurrencies as securities requiring registration under their guidelines. Paul Grewal, Coinbase's legal chief, insists these cryptocurrencies are not securities and are not within the SEC's jurisdiction. The SEC also disputes Coinbase's claim that the commission lacks authority over the crypto market until Congress specifies it. Considering the arguments presented by the SEC, digital collectibles could also be deemed as securities.
In a recent court filing, the United States Securities and Exchange Commission (SEC) urged a federal judge not to grant Coinbase's request to dismiss a lawsuit brought by the agency. The filing, submitted in a New York district court on October 3, refuted claims made by Coinbase in their dismissal motion, while underscoring the SEC's perspective that certain cryptocurrencies listed on Coinbase meet the criteria of investment contracts under the Howey Test and thus mandate SEC registration.
The SEC challenged the notion that investors, including those on Coinbase's platform, did not have a justified anticipation of an increase in their investment's value, hinging on the broadly published plans by the crypto asset issuers to sustain and grow their asset's value. The commission further suggested that Coinbase has always been aware that, should they fit the Howey Test, the cryptocurrencies they deal in are securities, an understanding they claim is reflected in Coinbase's filings with the SEC.
The SEC dismissed Coinbase's invocation of the "major questions doctrine," arguing it lacks the jurisdiction over the crypto marketplace until specified by Congress. The SEC maintained that it hasn't possessed any authority that is not already explicitly granted under the federal securities laws. In response to the SEC's stance, Coinbase's Chief Legal Officer, Paul Grewal, voiced his assertions on an October 3 Twitter post indicating that the assets in question were not securities and thus, not under the SEC's authority.
Grewal commented that the implications of the SEC's defense would categorize everything from collectibles like Pokemon cards to fan memorabilia as also being securities. From a similar perspective, the General Counsel of a16z Crypto, Miles Jennings, pointed out numerous inconsistences in the SEC's opposition to Coinbase's motion in a Twitter post. According to him, even if the court were to concur with the authorities' main argument about investment contracts, the case "should still fail," suggesting that the SEC's interpretation of an investment contract is far-reaching.
Published At
10/4/2023 1:38:10 AM
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