Lawyers representing the crypto exchange Coinbase have requested a New York judge to dismiss a lawsuit filed by the SEC insisting that the SEC surpass its jurisdiction in this case.
The SEC had accused Coinbase in June of failing to properly register as a securities exchange, broker, and clearing agency. However, Coinbase responded on Tuesday, asserting that the SEC’s regulatory authority is restricted to transactions involving securities.
“Investment contracts grant the purchaser a contractual claim related to the future income, profits, or assets of a business enterprise. That is what makes them securities rather than just investments,” Coinbase said in a filing
According to the SEC’s current argument, an investment contract could be deemed to exist if someone anticipates their purchase will become more valuable or if they invest money. Coinbase contends that this analysis would grant the SEC authority over a wide range of activities.
The SEC relies on the Howey Test, a legal benchmark established by a 1946 U.S. Supreme Court case involving citrus groves, to determine whether certain transactions should be regulated under securities laws. Coinbase argues that the SEC has extended its definition of the Howey Test far beyond its original intent.