The Securities and Exchange Commission (SEC) has formally requested a federal judge to reject Coinbase request to dismiss a legal action against it. Notably, the SEC contends that Coinbase was fully aware that the cryptocurrencies it offered constituted securities under the Howey test.
Furthermore, in a filing submitted on October 3 in a New York District Court, the SEC countered Coinbase’s arguments for dismissal and reaffirmed its position that certain cryptocurrencies featured on its platform were essentially investment contracts, subject to SEC regulation.
SEC Challenges Coinbase’s Actions and Rejects ‘Major Questions Doctrine’
According to the SEC’s submission, every issuer of crypto assets encouraged investors, including those on Coinbase’s platform, to reasonably anticipate the appreciation of their investments based on the issuer’s widely disseminated strategy to enhance and preserve the asset’s value.
Furthermore, the SEC maintained that Coinbase had been cognizant all along that the cryptocurrencies it traded would be classified as securities if they met the Howey Test criteria. The regulator alleged that Coinbase had acknowledged this fact in its submissions to the SEC.
The SEC also refuted Coinbase’s assertion that invoked the “major questions doctrine,” which argued that the SEC lacked authority over the cryptocurrency market until granted such authority by Congress. The SEC retorted that it had not assumed any new powers beyond what the federal securities laws already explicitly empowered it to do.
Coinbase Request Dismissal as Crypto Industry Challenges SEC’s Jurisdiction and Legal Arguments
On October 3, Coinbase’s Chief Legal Officer, Paul Grewal, took to Twitter to dismiss the SEC’s arguments as “more of the same old same old” and asserted that the assets it lists “are not securities and are not within the SEC’s jurisdiction.”
Grewal contended that the SEC’s arguments in its response would imply that “everything from Pokemon cards to stamps to Swiftie bracelets are also securities.” Miles Jennings, the General Counsel of a16z crypto, remarked in a subsequent post that the SEC’s motion “has significant shortcomings.”
Jennings added that even if the court were to concur with the primary argument made by the regulators regarding investment contracts, he believed the case should still be dismissed as he felt that the SEC’s definition of an investment contract was excessively expansive.