- Coinbase claims that the tokens on its platforms are not securities.
- Coinbase plans to dismiss the SEC lawsuit.
- The largest U.S. crypto exchange denies the allegations made by SEC, claiming SEC is running arbitrarily without approval from Congress.
Coinbase, the largest U.S. cryptocurrency exchange, responded to SEC’s claims over trading unregistered securities. Coinbase says that the digital assets on its platforms are outside what the Securities Exchange Commission regards as securities.
In a letter filed in Manhattan Federal Court, the crypto exchange claimed that SEC has no jurisdiction and authority to sue them.
“The SEC can pursue its claims only if the tokens and staking services it has identified are ‘securities’. They are not,” Coinbase stated.
SEC Crackdown on Coinbase for allegedly trading unregistered securities
SEC sued Coinbase for trading unregistered securities a day after the largest crypto exchange, Binance, was sued.
SEC claimed that the crypto exchange violated the provisions of The Securities Exchange Act of 1934. Allegedly, Coinbase has been operating as an unregistered broker and dealer. It claimed that Coinbase failed to register with the agency to avoid regulatory oversight. Coinbase was also charged with making billions as a middleman in trading unregistered securities like Solana, Cardano, Polygon, and other tokens.
The staking program, Coinbase Earn, was also one of the SEC’s reasons for instigating legal action against the crypto exchange.
Gary Gensler, SEC’s chair, has been hounding the crypto industry lately. He claims the crypto space undermines investors’ trust in the U.S. Capital markets.
Coinbase released a 177-page report denying the Securities Exchange Commission’s allegations. The crypto exchange stated that the SEC does not have Congress’ approval to regulate the crypto industry.
In the four–page report filed on Wednesday midnight, Coinbase stated that,
“The SEC fails to allege that the tokens it identifies as available in Wallet bear critical features of an investment contract and pleads nothing to suggest that Wallet functions as a broker under the securities laws in any event. As for staking, because the facts pleaded establish that staking service customers neither invest money for a share in an enterprise nor expose themselves to a risk of loss of their staked tokens by staking through Coinbase’s software nor receive managerial as opposed to administrative services; there is no investment contract as a matter of law.”
Coinbase has publicly announced its defenses in tweets, blog posts, and filings, denying the allegations. The largest crypto exchange in the U.S. stated that they have always been compliant with regulations and often seek formal guidance from SEC, SEC staff, and the court. The crypto exchange has voluntarily registered with 50 U.S. government regulatory bodies.
Before the legal battle between SEC and Coinbase, SEC served the crypto exchange a Wells Notice. The notice expressed that SEC intends to target Coinbase’s staking services, Coinbase Prime, Coinbase Wallet, and the spots market.
“We asked the SEC specifically to identify which assets on our platforms they believe may be securities, and they declined to do so,” Coinbase stated in a blog post.
The Securities and Exchange Commission refused to clarify their assertions in the Wells notice and the lawsuit.
In conclusion, Coinbase filed a motion to dismiss the SEC’s lawsuit that claims they violated the law.
