The United States Securities and Exchange Commission (SEC) has submitted a request to a federal judge, urging them to reject Coinbase’s motion to dismiss the regulator’s lawsuit.
In a filing dated October 3, filed in a New York District Court, the SEC countered Coinbase’s arguments in its dismissal motion. The SEC reaffirmed its position that certain cryptocurrencies listed on Coinbase’s platform should be considered investment contracts under the Howey Test and thus subject to SEC registration.
The SEC stated, “Each crypto asset issuer encouraged investors, including those purchasing on Coinbase’s platform, to reasonably anticipate an increase in the value of their investment based on the issuer’s widely disseminated plan to develop and maintain the asset’s value.”
Furthermore, the SEC claimed that Coinbase has been aware all along that cryptocurrencies it offers for sale could be considered securities if they met the criteria of the Howey Test. The SEC alleged that Coinbase acknowledged this fact in its submissions to the SEC.
The regulator also refuted Coinbase’s argument invoking the “major questions doctrine,” which suggested that the SEC lacks authority over the cryptocurrency market until Congress explicitly grants such authority.
The SEC countered this by stating, “The SEC has not assumed any new powers beyond what federal securities laws already expressly authorize it to do.”
In an October 3 Twitter post, Coinbase’s Chief Legal Officer, Paul Grewal, dismissed the SEC’s arguments as “more of the same old same old” and asserted that the assets listed on Coinbase are not securities and are outside the SEC’s jurisdiction. Grewal contended that the SEC’s arguments would imply that everything from Pokemon cards to stamps to Swiftie bracelets could also be considered securities.
Miles Jennings, General Counsel at a16z crypto, responded in a post, stating that the SEC’s motion “has a lot of holes.” He added that even if the court were to accept the SEC’s primary argument regarding investment contracts, he believed the case should still fail, as he considered the SEC’s definition of an investment contract to be overly broad.