Simon Ng The U.S. Securities and Exchange Commission (SEC) has issued a response to Coinbase’s recent legal filing, refuting the cryptocurrency exchange’s assertions and seeking to dismiss the ongoing lawsuit. The SEC reasserts its dominion over securities laws in its response, contending that Coinbase misconstrues the Howey test and misuses the “major questions doctrine” within the case.
SEC Takes a Stand Against Coinbase, Reinforces Authority Over Securities
Responding to Coinbase’s latest filing, which criticized the regulator’s interference in the cryptocurrency sector, the U.S. Securities and Exchange Commission (SEC) firmly stands by its jurisdiction over securities violations. The filing, presented to Judge Katherine Polk Failla on July 7, aims to refute every claim made by Coinbase in an attempt to undermine the lawsuit. The SEC has accused the exchange of unregistered brokerage and securities violations.
The SEC reasserts its jurisdiction over such securities cases in its response, arguing that its legal action against Coinbase is an extension of its longstanding authority to enforce statutory requirements, an authority granted by Congress in 1934 and carried out via civil law enforcement actions. This view conflicts with Coinbase’s position, which insists that the SEC has no authority to regulate digital asset exchanges.
The SEC points out that Coinbase has recently questioned the validity of the Howey test, despite using its criteria for making listing decisions before its public offering.
Dissecting Howey and the Major Questions Doctrine
The SEC asserts that Coinbase “endeavors to devise its own criteria for what constitutes an investment contract,” making flawed assumptions regarding the Howey test. This test outlines a series of factors that help determine whether transactions fall under the purview of securities laws.
The SEC dismisses Coinbase’s two criteria for an asset to be considered a security – the existence of a formal common law contract and the non-applicability of this contract to secondary market sales.
The regulatory agency also critiques the use of the major questions doctrine in this case, a principle that gives Congress regulatory supremacy over administrative agencies. The SEC states, “From its inception, the SEC has utilized its authority to pursue securities law violations – an authority it continues to exercise here.”
Nonetheless, the SEC did not address the changing position of its chairman, Gary Gensler, who went from stating that the agency “lacked the statutory authority to regulate businesses like Coinbase” at a congressional hearing in May 2021 to claiming they had “sufficient authority” in 2022.
Coinbase’s CLO Paul Grewal, who previously argued that the SEC’s interpretation of what constitutes an investment contract was unlawful, described this filing as “sadly … more of the same.”
What are your thoughts on the legal tussle between the SEC and Coinbase? We welcome your comments in the section below.
Table Of Contents
Frequently Asked Questions (FAQs) about SEC vs Coinbase Lawsuit
What is the SEC’s stance in the ongoing lawsuit against Coinbase?
The SEC has responded to Coinbase’s latest legal filing by refuting the cryptocurrency exchange’s assertions and seeking to dismiss the ongoing lawsuit. The SEC reasserts its jurisdiction over securities laws, arguing that Coinbase has misconstrued the Howey test and misused the “major questions doctrine.”
What is the SEC’s argument regarding its authority over securities?
The SEC asserts its jurisdiction over securities cases, stating that its legal action against Coinbase is part of its longstanding authority to enforce statutory requirements, as granted by Congress in 1934. This interpretation contradicts Coinbase’s views, which claim the SEC lacks the power to regulate digital asset exchanges.
How does the SEC view Coinbase’s interpretation of the Howey Test?
The SEC claims that Coinbase is attempting to create its own criteria for what constitutes an investment contract, making incorrect assumptions about the Howey test. The SEC contends that the two requirements Coinbase considers for an asset to qualify as a security are incorrect.
What is the SEC’s critique of the Major Questions Doctrine in this case?
The SEC criticizes Coinbase’s use of the major questions doctrine, a principle that prioritizes Congress’ regulatory action over administrative agencies. The agency states that it has consistently used its authority to pursue securities law violations, including in this case against Coinbase.
How does Coinbase’s CLO, Paul Grewal, respond to the SEC’s filing?
Paul Grewal, Chief Legal Officer at Coinbase, has expressed disappointment with the SEC’s filing, describing it as “sadly … more of the same.” He had earlier stated that the SEC’s interpretation of what constitutes an investment contract violated the law.
More about SEC vs Coinbase Lawsuit
- The U.S. Securities and Exchange Commission (SEC)
- Coinbase Official Website
- Understanding the Howey Test
- Major Questions Doctrine Explained
- SEC vs Coinbase Lawsuit Details
- Gary Gensler’s Position on Cryptocurrency Regulation
6 comments
Can’t help but feel for coinbase. feels like David vs Goliath story. Hope they come out strong on the other side.
hmm, interesting to see how the SEC is interpreting the Howey Test here. it’s not often we see such high-profile legal tussles on this front.
doesn’t seem right for the SEC to change its stance like this. One minute they say they lack authority, the next they’re all about enforcement. Typical…
wow, coinbase just can’t catch a break huh? sec really going hard on them. Wonder what this means for other crypto exchanges out there…
Wonder how this will all play out. A lot at stake here for the whole crypto industry. Keeping my fingers crossed!
tbh, I’ve always had my doubts bout SEC’s jurisdiction over digital asset exchanges. It’s clear now they’re not backing down anytime soon!