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The United States Securities and Exchange Commission (SEC) has faced a new development in the lawsuit it filed against crypto exchange Coinbase. Contrary to the SEC’s claim that all cryptocurrencies listed on the exchange are securities, Coinbase argued that not all of them comply with the definition of securities and requested the dismissal of the enforcement action filed by the US federal regulator. Coinbase also claimed that the SEC is attempting to expand its regulatory scope without authorization from the US Congress.
Coinbase: SEC Attempts to Redefine the Definition of Securities
The SEC initially filed a lawsuit against Coinbase in early June, along with Binance. The cryptocurrency exchange took action for the dismissal of the lawsuit in August, and Coinbase’s Chief Legal Officer stated that they hoped US regulators would be forced to establish clear rules that everyone can understand and follow.
Coinbase stated in its recent court filing against the SEC, “A security, as the SEC itself acknowledges, exists when a person invests their money and expects the value of the purchased asset to increase. The SEC is proposing to depart from this precedent in order to radically expand its jurisdiction. It claims to have authority over all investment activities and therefore asserts the right to define its own regulatory domain, limited only by its ambition.”
According to Coinbase, assets such as collectible cards, baseball cards, and cryptocurrencies can be investments, but they cannot be considered securities unless they involve a contract based on a demand for future profits or assets of a business. Coinbase also added that the SEC has failed to demonstrate that transactions on its platform involve such claims or provide a financial stake in a business. According to the cryptocurrency exchange, the SEC is attempting to redefine the definition of securities.
Coinbase Claims SEC is Overstepping its Boundaries
The SEC is facing significant challenges in its lawsuits against the cryptocurrency industry, which weaken its stance that most cryptocurrencies are securities. Some court decisions question whether the doctrine of substantial questions is valid in preventing the regulation of the emerging cryptocurrency industry.
In its court filing, Coinbase argues that the SEC’s approach exceeds the agency’s boundaries and raises concerns about the separation of powers, particularly when sanctions are imposed without clear regulatory guidance. The cryptocurrency exchange wrote, “The concerns about the separation of powers raised by this question find their most acute expression when an agency exercises sanctioning power without a regulatory process under the guise of enforcing the authority of the US Congress.”
Experts speculate that a final decision on the SEC-Coinbase case may be reached in early 2024. However, this lawsuit is not Coinbase’s only battle against the SEC. The cryptocurrency exchange filed a lawsuit against the US federal regulator in April to seek clarity on regulations regarding cryptocurrencies.
