has lodged a lawsuit with the Securities and Exchange Commission (SEC), accusing the company of unlawfully operating an unregistered national securities exchange, broker, and clearing agency. Coinbase asserts that as it does not deal in securities, the SEC lacks authority over its operations.
“Our core argument is straightforward – as per decades of Supreme Court and other binding precedent, we do not offer ‘investment contracts’,” stated Coinbase’s chief legal officer, Paul Grewal. “By disregarding this precedent, the SEC has violated due process, abused its discretion, and forsaken its previous interpretations of the securities laws. The SEC has disregarded the strict boundaries on its fundamental authority set by Congress.”
Today, filed our brief asking the Court to dismiss the SEC’s case against us. Our core argument is simple – we do not offer “investment contracts” as that term has been construed by decades of Supreme Court and other binding precedent. 1/3 pic.twitter.com/r2EkDgkEuc
— paulgrewal.eth (@iampaulgrewal) August 4, 2023
. According to the SEC, Coinbase has generated billions of dollars since at least 2019 by “illegally facilitating the buying and selling of crypto asset securities.”
In its motion to dismiss, Coinbase referenced a different SEC case. A judge ruled in July that Ripple Labs’ XRP was not considered a security when traded on exchanges (although institutional sales of XRP were subject to securities regulations, as determined by the judge).
However, this particular point may not work in Coinbase’s favor. Another judge recently disagreed with the Ripple ruling and allowed the SEC to proceed with a case against Terraform Labs and its CEO, Do Kwon, which includes allegations involving sales conducted on exchanges and . As explained by , neither the Ripple nor the Terraform case sets a precedent that controls the outcome of the Coinbase case.
Interestingly, Coinbase has compared the cryptocurrencies sold on its platform to baseball cards rather than securities. It argues that baseball cards, like commodities, are purchased and traded with the anticipation of increasing in value.
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Alex Smith is a writer and editor with over 10 years of experience. He has written extensively on a variety of topics, including technology, business, and personal finance. His work has been published in a number of magazines and newspapers, and he is also the author of two books. Alex is passionate about helping people learn and grow, and he believes that writing is a powerful tool for communication and understanding.
