The United States Securities and Exchange Commission (SEC) has pushed back against Coinbase’s attempt to have a lawsuit dismissed in a filing submitted on October 3 in a New York District Court. The SEC challenged Coinbase’s claims and reiterated its stance that certain cryptocurrencies listed on the platform could be considered investment contracts under the Howey test and thus subject to SEC registration.
In the filing, the SEC argued that crypto asset issuers had encouraged investors, including those on Coinbase’s platform, to expect an increase in the value of their investments based on the issuer’s plans to develop and maintain the asset’s value. The regulator contended that Coinbase had been aware of the potential classification of these cryptocurrencies as securities under the Howey test and alleged that the exchange had acknowledged this in its submissions to the SEC.
Furthermore, the SEC dismissed Coinbase’s argument invoking the “major questions doctrine,” which suggests that the SEC lacks authority over the crypto market until Congress explicitly grants such authority. The SEC insisted that it had not assumed any new powers beyond what federal securities laws already authorized.
In response to the SEC’s filing, Coinbase’s legal chief, Paul Grewal, took to Twitter on October 3, stating that the SEC’s arguments were repetitive and asserting that the assets listed on Coinbase were not securities and did not fall within the SEC’s jurisdiction. Grewal even humorously suggested that the SEC’s arguments, if taken to their logical extreme, would classify items like Pokemon cards, stamps, and Swiftie bracelets as securities.
Miles Jennings, the crypto general counsel at a16z, criticized the SEC’s motion in a post, pointing out what he saw as numerous flaws in the regulator’s arguments. Jennings also suggested that even if the court were to agree with the SEC’s primary argument concerning investment contracts, the case should still fail, as he believed the SEC’s definition of an investment contract was overly broad.
This legal battle between Coinbase and the SEC remains closely watched in the cryptocurrency industry, as it has significant implications for the regulatory status of various digital assets.
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