In the ongoing legal battle between Coinbase and the United States Securities and Exchange Commission (SEC), the American cryptocurrency exchange has filed a motion to dismiss the SEC’s complaint.
In a legal document filed on Thursday, June 29 with the U.S. District Court for the Southern District of New York, Coinbase raised concerns about the SEC’s interpretation of securities laws, suggesting the agency was reaching beyond its legal authority.
This move underscores Coinbase’s determination to challenge the SEC’s lawsuit. The motion to dismiss argues that even if all the allegations in the lawsuit are true, the plaintiff does not have a valid legal claim. Coinbase’s legal team stated in the filing:
“Even if the SEC were correct that the assets and services it identifies are within the scope of its existing regulatory authority, this [legal] action must be dismissed on independent grounds that it violates Coinbase’s due process rights and constitutes an extraordinary abuse of process.”
The SEC lawsuit alleged that Coinbase facilitated unregistered trading in 12 digital tokens that were deemed securities.
The company has contested this claim, and argued that the SEC was applying securities laws to certain digital tokens in ways that significantly deviate from existing legal frameworks. Paul Grewal, Coinbase’s chief legal officer, wrote in a tweet on June 29, that the SEC’s claims “go far beyond existing law” and should, therefore, be dismissed.
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
The SEC’s definition of security includes investment contracts, which have been interpreted by the Supreme Court in the Howey Test to include transactions where individuals invest money in a common enterprise and expect profits primarily from the efforts of others. In its suit, the SEC named 12 crypto tokens as securities, including Solana SOL, Cardano (ADA), Polygon (MATIC), The Sandbox (SAND), Flow (FLOW), Internet Computer (ICP), Near (NEAR) and Dash (DASH).
Related: Gary Gensler is hurting the little guys for Wall Street
The exchange’s lawyers further argued that in 2021, the SEC declared Coinbase’s registration statement with the commission effective, thereby permitting the company to sell its shares to investors when it went public.
The approval followed an extensive review process that spanned several months and involved in-depth discussions with Coinbase. This allowed Coinbase to trade more than 240 tokens on its spot exchange, including six of the 12 tokens now under dispute.
Magazine: SEC hates Metaverse