The United States Securities and Exchange Commission (SEC) yesterday (Friday) deposit his response to Coinbase’s denial of his claims, noting that the cryptocurrency exchange “understood that securities laws may apply to its conduct.” The securities watchdog added that Coinbase “knew what rules to consider in assessing the legality of its conduct” but decided to take the risk “in the name of growing its business.”
In early June, the SEC took Coinbase to court, claiming that the major crypto exchange in the United States operated an unauthorized trading platform on which it offered 12 crypto tokens that are unregistered securities. He further alleged that Coinbase operated an illegal crypto-staking service.
Responding to the SEC lawsuit last month, Coinbase said The SEC’s allegations “lack any foundation”, adding that the regulator had no legal authority to oversee its activities. Digital assets listed on Coinbase are not “securities” but “just a sale of assets”, the exchange claimed, citing the Howey test. The test is a legal doctrine used to decide whether a transaction qualifies as an investment contract, which is a type of security.
However, against Coinbase, the SEC claimed the exchange had deployed the test’s “legal framework” “as a basis for making listing decisions that it says now do not apply to its business.” The regulator further alleged that Coinbase had “explicitly discouraged” digital asset issuers from avoiding “problematic statements” that are “traditionally associated with securities” in their marketing materials.
Coinbase previously pointed to the SEC’s clearance of its public debut on the Nasdaq in April 2021 as evidence that it was not engaging in unregistered securities. However, the watchdog in the answer also countered this.
“Since becoming a public company, Coinbase has repeatedly advised its shareholders of the risk that crypto assets traded on its platform may be considered securities and therefore its conduct may violate federal securities laws. Securities, including in the very registration statement she now points to as evidence that the SEC would have blessed her conduct,” the SEC explained.
Does the SEC act outside of its jurisdiction?
Meanwhile, Coinbase, in its legal response to the SEC, argued that even though the Commission had the power to regulate its cryptocurrency exchange activities, the watchdog’s lawsuit still violates its “rights to a due process” and this constitutes “an extraordinary abuse of process”. The exchange said the “major issues doctrine” should also be applied in such a situation, which means the SEC will need new legal support from the US Congress to regulate digital assets as securities.
In response, the SEC poked holes in the argument, noting that the crypto exchange “misunderstands the purpose and scope” of the doctrine. The regulator believes that the doctrine is rooted in the “separation of concerns from powers”.
“This case, by contrast, involves the SEC exercising its longstanding authority to enforce legal requirements,” the regulator said. “In 1934, Congress authorized the SEC to enforce federal securities laws through civil law enforcement actions.”
Additionally, the SEC noted that if the court approved Coinbase’s request for an order quashing its claims, it would file a counter petition. In the meantime, finance tycoons reported that the US District Court in New York set July 13, 2023 as date approved hear the case between the two parties.
The United States Securities and Exchange Commission (SEC) yesterday (Friday) deposit his response to Coinbase’s denial of his claims, noting that the cryptocurrency exchange “understood that securities laws may apply to its conduct.” The securities watchdog added that Coinbase “knew what rules to consider in assessing the legality of its conduct” but decided to take the risk “in the name of growing its business.”
In early June, the SEC took Coinbase to court, claiming that the major crypto exchange in the United States operated an unauthorized trading platform on which it offered 12 crypto tokens that are unregistered securities. He further alleged that Coinbase operated an illegal crypto-staking service.
Responding to the SEC lawsuit last month, Coinbase said The SEC’s allegations “lack any foundation”, adding that the regulator had no legal authority to oversee its activities. Digital assets listed on Coinbase are not “securities” but “just a sale of assets”, the exchange claimed, citing the Howey test. The test is a legal doctrine used to decide whether a transaction qualifies as an investment contract, which is a type of security.
However, against Coinbase, the SEC claimed the exchange had deployed the test’s “legal framework” “as a basis for making listing decisions that it says now do not apply to its business.” The regulator further alleged that Coinbase had “explicitly discouraged” digital asset issuers from avoiding “problematic statements” that are “traditionally associated with securities” in their marketing materials.
Coinbase previously pointed to the SEC’s clearance of its public debut on the Nasdaq in April 2021 as evidence that it was not engaging in unregistered securities. However, the watchdog in the answer also countered this.
“Since becoming a public company, Coinbase has repeatedly advised its shareholders of the risk that crypto assets traded on its platform may be considered securities and therefore its conduct may violate federal securities laws. securities, including in the very registration statement she now points to as evidence that the SEC would have blessed her conduct,” the SEC explained.
Does the SEC act outside of its jurisdiction?
Meanwhile, Coinbase, in its legal response to the SEC, argued that even though the Commission had the power to regulate its cryptocurrency exchange activities, the watchdog’s lawsuit still violates its “rights to a due process” and this constitutes “an extraordinary abuse of process”. The exchange said the “major issues doctrine” should also be applied in such a situation, which means the SEC will need new legal support from the US Congress to regulate digital assets as securities.
In response, the SEC poked holes in the argument, noting that the crypto exchange “misunderstands the purpose and scope” of the doctrine. The regulator believes that the doctrine is rooted in the “separation of concerns from powers”.
“This case, by contrast, involves the SEC exercising its longstanding authority to enforce legal requirements,” the regulator said. “In 1934, Congress authorized the SEC to enforce federal securities laws through civil law enforcement actions.”
Additionally, the SEC noted that if the court approved Coinbase’s request for an order quashing its claims, it would file a counter petition. In the meantime, finance tycoons reported that the US District Court in New York set July 13, 2023 as date approved hear the case between the two parties.
