Coinbase asked the U.S. District Court for the Southern District of New York to toss its legal battle with the SEC.
For Coinbase, the legal battle which the US Securities and Exchange Commission (SEC) started should only have one ending—the court striking out the case for being unlawful.
The crypto exchange has filed a motion asking the court to dismiss the SEC suit against it.
Coinbase asks court to dismiss case
On Friday, August 4, the largest cryptocurrency exchange in the US filed a motion asking the judge to strike out the SEC case against it.
The San Francisco-based company said in a Federal filing that the SEC claims must be dismissed as what they prayed for are outside the jurisdiction of the commission.
The motion outlines that crypto exchanges are not under the authority of the SEC on the fundamental basis. It noted that there was a 2021 statement from the SEC Chair Gary Gensler requesting that Congress grant him the power to regulate crypto exchanges.
“By ignoring that precedent, the SEC has violated due process, abused its discretion, and abandoned its own earlier interpretations of the securities laws,” Coinbase legal chief Paul Grewal wrote on X.
Coinbase further claimed that they do not offer “investment contracts.” A type of contract under SEC’s purview.
“The transactions over Coinbase’s platform and Prime are not, and do not involve, contractual undertakings to deliver future value reflecting the income, profits, or assets of a business. They are commodity sales, with the obligations on both sides discharged entirely the moment the digital token is delivered in exchange for payment,” the filing stated.
By applying this logic, Coinbase said that the SEC could only pursue the issue if it could provide evidence of pertinent transactions involving investment contracts in digital assets on its platform or when using its services. The SEC, according to Coinbase, has failed to identify any such transactions.
The cryptocurrency exchange also mentioned a recent decision that went partially in Ripple’s favor in a lawsuit similar to this one against the SEC, claiming that the fundamental circumstances were “substantially identical to those alleged here.” However, there is no assurance that the court will take this argument into consideration given that Terraform Labs, another cryptocurrency business, recently attempted to mention the Ripple case but was dismissed by Judge Rakoff.
It appears that despite Coinbase pursuit of a fast resolution to this suit, they would have to wait awhile to get a response from the SEC.
The SEC had 2 months to respond to Coinbase, with an answer expected by October 3. Also, parties who are interested in joining Coinbase in the suit will have to do so by August 11.
The lawsuit alleges that Coinbase was trading in unregistered securities. The SEC said that the platform had at least 13 cryptocurrencies that could be classified as securities.
In the past, Coinbase had requested that the SEC give more clarity on what was considered as securities. However, the regulator requested for four months to respond.
As it stands, Coinbase seems sure to win, with Paul expressing optimism regarding the odds of winning.
“With respect to the litigation with the SEC, I want to be very clear. We do think we can win. We expect to win,” he said.
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