Coinbase has moved to dismiss a lawsuit by the Securities and Exchange Commission (SEC), claiming the regulatory breached due process and changed its mind about its authority over digital assets.
Coinbase moves to dismiss legal complaint
In its filed response to the SEC on Thursday, Coinbase argued that the regulator’s claims go beyond the scope of 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
In the 177-page document, Coinbase rebutted the SEC’s main claim that it operated an unregistered securities exchange, saying that none of its assets were in fact securities.
Six of the twelve assets that the SEC alleged are securities were trading on Coinbase when the regulator approved the firm’s registration at the time of its Direct Public Offering.
The filing stated:
“The SEC’s about-face is not a product of material changes to Coinbase’s business since 2021; none are alleged. Nor is it due to new information.”
“The only change is in the SEC’s position regarding its powers.”
The legal response to the SEC’s complaint referenced statements made by Chairman Gensler in May 2021, when he testified in front of Congress that the regulatory body lacked authority to regulate Coinbase and similar businesses. At the time, Gensler said there was no market regulator for crypto exchanges that provided a regulatory framework.
Coinbase then went onto say that in the event that the SEC has oversight authority, then the enforcement action should be dismissed on independent grounds. Specifically, Coinbase says that the regulator violated the company’s due process rights and its action “constitutes an extraordinary abuse of process.”
Coinbase asked that the court dismiss the SEC’s complaint and grant judgement in favour of all claims.
“In other words, they ask the court to say ‘you win on the merits, Coinbase.’ This is rare, and IMO a bigger news story than the answer and forthcoming motion to dismiss,” tweeted Bill Hughes, senior counsel and director of global regulatory matter at ConsenSys.
Gensler flip flops
Back in 2018, when Gensler was a senior MIT lecturer and former chair of the Commodities Futures Trading Commission (CFTC), the regulator spoke about four cryptocurrencies not being securities, namely Bitcoin, Litecoin, Bitcoin Cash and Ethereum. More recently, as head of the SEC, Gensler was did not provide clarity with regards to Ethereum’s commodity or security status.
The back and forth has created uncertainty on the legal status of most cryptocurrencies and digital assets in the cryptofinance space.
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