Coinbase Challenges SEC’s Authority in Lawsuit Dismissal Bid
In its final attempt to dismiss a lawsuit by the Securities and Exchange Commission (SEC), Coinbase argued that the regulatory body overstepped its authority when it classified cryptocurrencies listed on its platform as securities. Coinbase filed a motion on October 24 in a New York District Court, criticizing the SEC’s broad definition of securities and asserting that the cryptocurrencies listed on its exchange are outside the regulator’s jurisdiction.
“The SEC’s authority is limited to securities transactions. Not every parting of capital with a hope of gain qualifies, and trades over Coinbase are only securities transactions if they involve ‘investment contracts.’ The transactions at issue here do not,” stated Coinbase in its filing.
Coinbase further claimed that the SEC has undertaken a “radical expansion of its own authority” and asserted that only Congress has the power to extend jurisdiction over investment activities under the major questions doctrine. Paul Grewal, Coinbase’s chief legal officer, echoed these claims in an October 24 post, criticizing the SEC’s definitions for having “no limiting function at all.”
This filing by Coinbase is in response to the SEC’s rebuttal on October 3, where the regulatory body asked the court to reject Coinbase’s motion to dismiss the lawsuit. The SEC maintained its belief that the cryptocurrencies listed on Coinbase were investment contracts under the Howey test, a standard used to determine whether an asset is a security.
The SEC initially sued Coinbase on June 6, alleging that the exchange violated U.S. securities laws by listing tokens it considered as securities without registering with the regulator. Coinbase responded by filing a motion for judgment on June 29, arguing that the SEC was abusing its power and violating its due process rights.
Judge Katherine Polk Failla, who is overseeing the case, has the authority to call for oral arguments and issue a judgment, dismiss the case, or refer it to be heard by a jury.
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