Coinbase, the leading American cryptocurrency exchange, has taken a strong stance in its legal battle against the United States Securities and Exchange Commission (SEC) by filing a motion to dismiss the SEC’s complaint.
The motion, submitted to the U.S. District Court for the Southern District of New York on Thursday, June 29, raises concerns about the SEC’s interpretation of securities laws, suggesting that the agency is overstepping its legal authority.
In its bid to challenge the SEC’s lawsuit, Coinbase’s legal team argues in the motion that even if the allegations in the lawsuit are true, the plaintiff lacks a valid legal claim.
The filing asserts that the SEC’s actions not only violate Coinbase’s due process rights but also constitute an extraordinary abuse of process, demanding dismissal of the case.
Coinbase’s determination to defend its position against the SEC’s claims is evident in this motion.
The SEC’s lawsuit accuses Coinbase of facilitating unregistered trading of 12 digital tokens that the agency considers securities.
However, Coinbase has strongly contested this allegation, asserting that the SEC is applying securities laws to digital tokens in a manner that deviates significantly from existing legal frameworks.
Paul Grewal, Coinbase’s chief legal officer, expressed this sentiment in a tweet on June 29, stating that the SEC’s claims “go far beyond existing law” and should be dismissed accordingly.
The SEC’s definition of securities encompasses investment contracts, which have been interpreted by the Supreme Court through the Howey test to include transactions where individuals invest money in a common enterprise with the expectation of primarily profiting from the efforts of others.
The SEC’s lawsuit identifies 12 crypto tokens, such as Solana, as securities based on this definition.
Coinbase’s legal team also highlighted that in 2021, the SEC had declared the company’s registration statement effective, allowing Coinbase to sell its shares to investors during its public listing.
This approval came after a thorough review process involving extensive discussions between Coinbase and the SEC, spanning several months.
Consequently, Coinbase was authorized to trade over 240 tokens on its spot exchange, including six of the 12 tokens currently disputed by the SEC.
By filing this motion to dismiss, Coinbase continues to challenge the SEC’s lawsuit and its interpretation of securities laws.
The outcome of this legal battle will not only impact Coinbase’s operations but also shape the regulatory landscape for the broader cryptocurrency industry in the United States.
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