U.S. cryptocurrency exchange Coinbase has made its first legal response to the Securities and Exchange Commission’s (SEC) lawsuit, claiming that digital assets listed on its platform are outside the purview of the regulator.
The SEC had sued Coinbase on June 6, alleging that certain cryptocurrencies offered on its platform were unregistered securities. In its response, Coinbase argues that these cryptocurrencies are not investment contracts and, therefore, should not be classified as securities.
Coinbase’s argument in the filing further explains its position, stating that the cryptos traded on its secondary market platform do not involve arrangements where a promoter sells an asset tied to a contract. The company refers to the Supreme Court’s Howey case as an example, emphasizing that the issuers of the tokens do not owe any obligations to investors. Coinbase contends that since the transactions on its exchange do not involve securities, they should not be considered as securities transactions.
The filing also highlights Coinbase’s previous public statements, reiterating that current SEC Chair Gary Gensler changed his stance on the regulator’s authority over cryptocurrencies after assuming office.
Coinbase emphasizes its willingness to be regulated and its requests for guidance from the SEC regarding the application of securities laws to the digital asset industry. Furthermore, the filing claims that the SEC’s actions constitute a violation of Coinbase’s due process rights and an abuse of process.
Coinbase states that it has voluntarily complied with regulations from various regulatory bodies, followed limited formal guidance from the SEC, senior SEC Staff, and the courts, and sought clarification from the SEC regarding the application of federal securities laws to the digital asset industry.
The company argues that the SEC’s decision to pursue enforcement actions rather than rulemaking is a choice that reflects an undisclosed change in the regulator’s view of its own authority.
The legal response from Coinbase challenges the SEC’s jurisdiction and asserts that the cryptocurrencies listed on its platform should not be considered securities. The lawsuit response sets the stage for a potential legal battle between Coinbase and the SEC as they navigate the evolving regulatory landscape surrounding cryptocurrencies.
Also Read: US Judge Denies Binance US Motion Against SEC Press Release
