key takeaways:
- Coinbase attempts to dismiss SEC allegations, calling them a ‘extraordinary abuse of process’
- In its complaint, Coinbase said that the SEC’s lawsuit is the result of a shift in the regulator’s attitude towards the bitcoin business.
In a bold move to protect its reputation and industry standing, Coinbase, one of the world’s leading cryptocurrency exchanges, has decided to seek the dismissal of the lawsuit filed against it by the U.S. Securities and Exchange Commission (SEC). This development marks a critical moment in the ongoing battle between the crypto industry and regulatory authorities.
Coinbase has submitted a motion to dismiss the Securities and Exchange Commission’s (SEC) complaint against it for operating as an unregistered corporation and breaking securities laws.
In its filing, Coinbase claims that the SEC lacks legal jurisdiction to regulate the exchange and that the SEC’s claims to have certain authorities are “untenable as a matter of law.” The 177-page, 11-point defence motion was submitted by the exchange on June 28.
The company argues that the SEC’s allegations are baseless and that its lending program does not qualify as a security. Coinbase’s decision to fight back demonstrates its commitment to protecting its business model and challenging what it perceives as regulatory overreach.
Coinbase has disputed the SEC’s claim, stating that the regulatory body has been applying securities laws to digital tokens in a manner that deviates significantly from the existing legal frameworks. Paul Grewal, the Chief Legal Officer of Coinbase, expressed this stance in a tweet on June 29, asserting that the SEC’s allegations “far exceed the boundaries of current law” and should, therefore, be rejected.
Out of the 12 cryptocurrencies that the SEC has classified as securities, Coinbase said that it had listed six before its 2021 public debut and that the financial watchdog had not at the time classified these assets as securities. The opinion of Coinbase is that:
The SEC has now stated that “none of the assets the SEC has identified are in fact securities, and for that and other reasons, secondary transactions in those assets are also not securities.“
In their legal motion, Coinbase’s legal team argued that tokens deemed to be securities by the SEC should not be classified as such. They emphasized that for a token to be considered an “investment contract,” there must be a contractual commitment to generate profits or a business entity with enforceable obligations towards investors.
The SEC’s actions and remarks in the past have been in conflict with its most recent litigation against Coinbase, according to the filing, which also invoked the equitable estoppel defence doctrine. A legal notion known as equitable estoppel may be invoked as a defence if prior actions or declarations caused another party to reasonably rely on those actions.
