Coinbase, a cryptocurrency
exchange, has filed a response against the allegations from the Securities
and Exchange Commission (SEC), saying the claims “lack all
merit.” It also argued that even if the SEC’s assertion of regulatory power over its cryptocurrency
services was correct, the watchdog’s action still violates its “due process rights and
constitutes an extraordinary abuse of process.”
Coinbase
Slams SEC over ‘Securities’ Claims
In early
June, the SEC filed a lawsuit against
Coinbase, claiming
that the largest crypto exchange in the United States, is operating an
unauthorized trading platform and offers unregistered securities. The financial
watchdog also accused Coinbase of running a digital asset staking-as-a-service
programme without permission.
However, in
its 177-page-long response submitted to the district court
of New York yesterday (Wednesday), Coinbase
said it is not and has never been a securities exchange, broker or clearing
agency. It also argued that cryptocurrencies traded on its platform fall
outside the SEC’s authority because they are not ‘investment contracts’ or assets
pooled from investors to engage in businesses. Without
this obligation, Coinbase’s listed crypto are not ‘securities’ but ‘just an
asset sale,’ the exchange contended.
Today @coinbase filed our answer and notice of intent to file a motion to dismiss the @SECGov case against us. You can read our response for yourself – our arguments speak for themselves. 1/2 https://t.co/Ld2ZEejhyM
— paulgrewal.eth (@iampaulgrewal) June 29, 2023
To support
its argument that its assets listed are not securities, Coinbase
referenced a speech from June 2018 by Bill Hinman, the former
Director of the SEC’s
Division of Corporation Finance. In the speech, Hinman said that a token all by itself is not a security and the sales
of Ether, the second largest cryptocurrency after Bitcoin, were not securities
transactions.
More Defence from Coinbase
Furthermore,
Coinbase, while expanding on its argument that the SEC has no legal power to
supervise its business, pointed to the Chairman of the SEC, Gary Gensler who submitted his testimony before
the US Congress in May 2021. During the testimony,
Gensler said that crypto
exchanges lack a regulatory framework and market regulator.
Meanwhile, the SEC in its allegations named 12 cryptocurrencies offered by Coinbase, including Solana (SOL),
Cardano (ADA), Polygon (MATIC), Sandbox (SAND) and Axie Infinity (AXS), as
tokens. However, in the filing, Coinbase noted that six of the named tokens were
already being traded on its platform from April 2021 when the SEC
accepted its registration statement.
The
exchange said it had successfully registered with the securities regulator after “years of discussions”
and “a months-long process of extensive review.”
“Coinbase
had opened its business to the SEC, explaining its listing of digital assets,
provision of trading and staking services, and self-custody wallet software —
core aspects of Coinbase’s operations, then as now,” the exchange explained.
Despite
these developments, Coinbase said that it repeatedly continued to seek engagement
with the SEC and even petitioned the
regulator in July
last year to explain what assets it considers as securities. Earlier this month,
after the exchange asked a federal court to compel the regulator to
respond, the SEC said it had not decided on what action to take with regard to
the petition, Finance Magnates
reported.
No, seriously— what’s it gonna take? https://t.co/rpiaSsSYYo
— paulgrewal.eth (@iampaulgrewal) June 28, 2023
Other pages
in Coinbase’s court filing provided the basis for Coinbase’s opposition to the
SEC’s allegations. The exchange’s quick response was made in the wake of the securities
watchdog’s heightened regulatory
crackdown on crypto
exchanges in the United States.
SEC vs Coinbase Case Set for July 13
The date
for hearing the case between the Securities and Exchange Commission (SEC) and
the cryptocurrency exchange has been set for July 13. It is much earlier than
expected since the exchange filed its first response 40 days before the
deadline.
Additionally,
the court has changed the pre-trial conference to a pre-motion conference, with
the hearing expected to be at 14:00 UTC. Before the changes, the case was
scheduled to be heard on August 24.
Some of
the arguments the SEC would be responding to concern a list of
cryptocurrencies the commission claims to be securities in its filing against
Coinbase. Additionally, the regulator will also be addressing a complaint that
the subject matter was outside its jurisdiction.
AvaTrade’s veteran joins GKFX; Nasdaq welcomes 60 IPOs; read today’s news nuggets.
This article was written by Solomon Oladipupo at www.financemagnates.com.
