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SEC Opposes Coinbase’s Request to Dismiss Lawsuit

2 mins
Updated by Kyle Baird
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In Brief

  • The SEC urges the court to deny Coinbase's dismissal request, alleging that transactions did involve securities.
  • Coinbase argues that SEC has not identified transactions involving the purchase and sale of securities.
  • SEC asserts Coinbase's wallet application operates as an unregistered broker, soliciting investors to use its features.
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The United States Securities and Exchange Commission (SEC) has urged the US District Court to deny cryptocurrency exchange Coinbase efforts to dismiss its lawsuit against the crypto exchange.

The Motion hinges on whether Coinbase intermediated transactions involving investment contracts—thus securities. It did, the SEC argues.

SEC Reiterates Key Arguments Against Coinbase In Response

In a recent court filing, the SEC opposed Coinbase’s plea to the US District Court for a complete dismissal of the lawsuit between the regulatory body and the exchange.

On June 29, Coinbase submitted a court request for the dismissal of the SEC’s legal action against them. Coinbase argued that the SEC has not successfully identified transactions involving the purchase and sale of securities. This highlights the ongoing ambiguity regarding what qualifies as a security with crypto.

In the filing, the SEC restates that Coinbase’s staking rewards constitute investment profits. However, Coinbase maintains that it is just “payments for putting crypto assets to work.”

Furthermore, it accuses Coinbase of promoting the staking program as an investment opportunity through its marketing materials:

“In other words, Coinbase ‘promoted’ the Staking Program “as an investment or as a means whereby participants could pool … their money and [Coinbase]’s contribution in a meaningful way.”

Meanwhile, the SEC once more asserted its stance that the exchange’s wallet application functions as an unregistered broker.

However, it emphasized that aside from the argument that cryptos are not securities, there are no other justifications.

“Coinbase actively solicits investors (on its website, blog, and social media) to use Wallet’s trading features, which compare prices across different third-party trading platforms, and takes and routes customers’ orders in crypto asset securities to those platforms.”

On June 6, the SEC took legal action against Coinbase, merely a day after initiating a comparable lawsuit against the world’s largest cryptocurrency exchange, Binance.

On the week of the filing, Coinbase witnessed a 28% drop in its stock price.

Coinbase COIN stock price after SEC filing. Source: TradingView
Coinbase COIN stock price after SEC filing. Source: TradingView

However, Brian Armstrong, the CEO of Coinbase, has voiced strong criticism regarding the US approach to crypto in recent times.

Most recently, his push for regulatory clarity in the US was made apparent through his political campaign “Stand with Crypto.”

Over 50 crypto founders support this campaign, which aims to advocate for regulations favorable to the industry. Its goal is to ensure that the US economy doesn’t miss out on the potential growth of the crypto sector in the years ahead.

Top crypto platforms in the US | March 2024

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Ciaran Lyons
Ciaran is a cryptocurrency journalist based in Sydney, Australia. He particularly enjoys writing about CBDC developments and the practical implementations of cryptocurrency in real-world scenarios. He has also appeared across major television networks in Australia including Channel Ten, Channel Nine and SBS TV. Prior to his foray into cryptocurrency, Ciaran worked as a presenter on national radio station Triple J.
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