Coinbase has filed a motion to dismiss a lawsuit brought against the company by the Securities and Exchange Commission (SEC). The SEC accused Coinbase of operating an unregistered national securities exchange, broker, and clearing agency illegally. Coinbase argues that it does not deal in securities, and therefore, the SEC has no authority over its operations.
The company’s chief legal officer, Paul Grewal, stated that Coinbase does not offer “investment contracts” as defined by Supreme Court precedent and other binding interpretations. Coinbase contends that the SEC’s actions violate due process, abuse its discretion, and contradict its earlier interpretations of securities laws.
Coinbase cited a ruling in a separate SEC case involving Ripple Labs’ XRP cryptocurrency, where a judge determined that XRP was not a security when sold on exchanges. However, another judge recently disagreed with this ruling in a case involving Terraform Labs and its CEO, allowing the SEC to proceed with claims involving sales on exchanges and allegations of fraud.
Coinbase has likened the cryptocurrencies sold on its platform to commodities like baseball cards, which people buy and sell with the hope of increasing in value. The outcome of the motion to dismiss remains to be seen, and the case could have implications for the regulatory oversight of cryptocurrency exchanges in the future.
