The U.S. Securities and Exchange Commission (SEC) opposed Coinbase’s motion to dismiss the charges against it.
In a July 7 filing, the regulator stated that Coinbase was aware of the potential application of federal securities laws to its operations.
SEC Alleges Coinbase Knew Securities Law Could Apply to its Business
According to the regulator, the exchange knew the risks of its conduct but chose to take on “this risk in the name of growing its business.”
“Since becoming a public company, Coinbase has repeatedly informed its shareholders of the risk that the crypto assets traded on its platform could be deemed securities and therefore that its conduct could violate the federal securities laws.”
The SEC declared that Coinbase acknowledged its lack of registration to sell securities. However, the exchange is contesting the regulator’s classification of the cryptocurrencies it offers as securities.
The Commission countered that “at least 13 of the crypto assets Coinbase makes available for trading are investment contracts, and thus securities.”
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Coinbase Lawyer Argues Against SEC Move
Meanwhile, Coinbase Chief legal officer Paul Grewal said the SEC’s motion does not say anything new. Grewal argued that the regulator disregarded Howey’s crucial requirement of enforceable rights against the issuer in investment contracts.
Grewal said the Commission ignored Chair Gensler’s testimony before Congress that it lacks statutory authority over businesses like Coinbase. Additionally, the lawyer stated that the regulator was ignoring “the clear and unmistakable warnings of the Supreme Court” against regulatory overreach.
He added:
“[The SEC] ignore their obligation to give due regard to the public interest and investor protection when they allowed us to list publicly over two years ago.”
Meanwhile, Grewal noted that the regulator and Coinbase agreed that the crypto industry needed regulatory clarity.
According to the court document, the SEC and Coinbase lawyers would meet and confer on July 10.
SEC and Coinbase Legal Tussles
Besides the SEC charges against Coinbase, the two organizations have engaged in a prolonged legal battle concerning the absence of regulations for the crypto industry.
On June 16, the crypto exchange slammed the regulator for dodging its rulemaking petition. The exchange argued that the SEC refused to provide regulatory clarity while demanding compliance with non-existent rules.
Under Chair Gensler, the SEC has repeatedly stated that existing securities law adequately governs the crypto space. However, several crypto stakeholders, including Coinbase, have argued that the industry needs tailored regulations.
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