Top US-based crypto exchange Coinbase is filing a motion to dismiss the U.S. Securities and Exchange Commission’s (SEC) lawsuit against it.
The SEC sued Coinbase earlier this month alleging that the platform was selling unregistered securities after it dubbed a number of crypto assets, such as Cardano (ADA), Solana (SOL), and Polygon (MATIC), as securities.
However, Coinbase recently filed a motion with the Southern District of New York to dismiss the lawsuit, saying that the regulatory body lacks jurisdiction. In the filing, Coinbase argues that its transactions don’t qualify as securities.
“Like all securities, an economic arrangement can qualify as an investment contract only if it involves an ongoing business enterprise whose management owes enforceable obligations to investors. Absent such obligations, the contract is just an asset sale.
Because no such obligations are carried in the transactions over Coinbase’s secondary market exchange, and because the value that Coinbase purchasers receive through these transactions inheres in the things bought and traded rather than in the businesses that generated them, the transactions are not securities transactions.”
According to Coinbase, SEC Chair Gary Gensler is overreaching his authority by saying that crypto companies must register as securities exchanges and that they must be retroactively punished for failing to comply.
“Before the SEC’s recent regulatory overreach, no court had ever interpreted ‘investment contract’ to apply to a stand-alone asset sale. Nor to any arrangement lacking an obligation upon the seller to operate a business for the buyer’s benefit.
Yet by the end of 2022, nothing having changed except the SEC’s position, Chair Gensler was proclaiming, ‘I feel that we have enough authority, I really do, in this space’ to require crypto companies to register as national securities exchanges.
As evidenced by this lawsuit, the SEC also now asserts the authority to extract punitive retroactive penalties from companies for failure to recognize powers its own Chair was disclaiming two years ago.”
The SEC is also suing Binance, the world’s largest crypto exchange platform by volume, on similar grounds.
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