Coinbase responds to SEC lawsuit, alleges due process violation and jurisdiction overreach.
In its initial legal response to the SEC’s lawsuit, Coinbase, the U.S. cryptocurrency exchange, asserted that the digital assets listed on its platform are not within the regulatory scope of the U.S. Securities and Exchange Commission (SEC). In simpler terms, Coinbase argues that the SEC does not have authority over the digital assets traded on its platform.
Coinbase, following the SEC’s lawsuit in early June, has been accused of offering unregistered securities through its wallet or trading platforms. In its response, filed on Thursday, Coinbase argues that the cryptocurrencies in question are not securities as they do not qualify as investment contracts. In simpler terms, Coinbase disputes the SEC’s claim, stating that the cryptocurrencies it offers are not considered securities under their definition.
Coinbase, in its latest filing, reiterated an argument it had previously made in public statements. The company clarified that cryptocurrencies traded on its secondary market platform do not involve arrangements where a promoter sells assets connected to a contract.
Coinbase referred to the Supreme Court’s Howey case as an example to support its position. In simpler terms, Coinbase states that the cryptocurrencies on its secondary market are not sold in a way that resembles the arrangement described in the Howey case.
According to the filing, the issuers of the tokens on Coinbase’s secondary market exchange do not have any obligations towards investors. Coinbase argues that since these transactions do not involve obligations or derive value from the businesses behind them, but rather from the bought and traded assets themselves, they should not be considered securities transactions.
In simpler terms, Coinbase states that the tokens traded on its platform do not carry obligations from the issuers to investors and derive value from the assets rather than the underlying businesses, therefore not qualifying as securities transactions.
In its filing, Coinbase restates previously made public statements, highlighting that the SEC Chair, Gary Gensler, seemingly altered his stance on the regulator’s authority over cryptocurrencies during his tenure. Coinbase also mentions its request for regulation and highlights that Congress has initiated discussions on the topic of crypto regulation.
In simpler terms, Coinbase points out that the SEC Chair’s position on crypto regulation changed over time, emphasizes the company’s desire for regulation, and acknowledges the ongoing congressional deliberations on crypto regulation.
The filing argues that even if the SEC’s claim about the assets and services falling within its regulatory authority is valid, the lawsuit should be dismissed due to the violation of Coinbase’s due process rights and the perceived abuse of process.
Coinbase highlights its history of voluntary regulatory compliance, adherence to limited guidance from the SEC, and requests for clarity on how securities laws apply to the digital asset industry. Coinbase asserts that the SEC’s actions demonstrate a changing and undisclosed shift in its own interpretation of its authority.
In simpler terms, Coinbase contends that the lawsuit infringes on its due process rights and constitutes an abuse of process. It points out its past compliance with regulations, limited guidance received, and its requests for clarity on securities laws, while claiming that the SEC’s actions reflect an undisclosed change in its own view of authority.
The filing asserts that the SEC has opted for enforcement actions instead of rulemaking. In simpler terms, Coinbase claims that the SEC has chosen to focus on enforcement actions rather than establishing new rules and regulations.
Important:Â Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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