SEC asks judge to dismiss Coinbase lawsuit

The United States Securities and Exchange Commission has asked a federal judge to deny Coinbase's request to dismiss the regulator's lawsuit.

In an Oct. 3 filing in New York District Court, the SEC hit back at claims in Coinbase's divestment activity and reiterated its belief that some of the cryptocurrencies listed on its platform are investment contracts subject to the Howey test, according to SEC filings.

“Each crypto asset issuer invites investors – including buyers on Coinbase's platform – to reasonably expect that the value of their investment will increase based on the issuer's widely disseminated plan to develop and maintain their investment value,” the SEC wrote.

The SEC asserted that Coinbase “always knew” that the cryptocurrencies it sold were securities if they met the Hawaii test and that the exchange acknowledged this in its filings with the SEC.

The regulator cleared Coinbase's argument by invoking the “prime questions doctrine,” which says the SEC has no jurisdiction over the crypto market until Congress does.

“The SEC has not assumed any new power for itself to do what the federal securities laws did not already expressly permit,” the SEC said.

In an October 3 X (Twitter) post, Coinbase chief legal officer Paul Grewal said the SEC's arguments were “more of the same old same” and that the listed assets “are not securities and are not under the SEC's jurisdiction.”

@SECgov filed its objection to our motion to dismiss their lawsuit against @Coinbase . It's more of the same old same old. But don't just take my word for it – see for yourself. 1/7 https://t.co/QMdkRoiq0V

— paulgrewal.eth (@iampaulgrewal) October 3, 2023

“Everything from Pokemon cards to stamps to Swifty bracelets are securities,” Grewal said in response to the SEC's arguments.

Related: SEC Begins Legal Action Against FTX Auditor

Miles Jennings, a16z crypto's general counsel, said in an X post that the SEC's move “has a lot of holes.”

SEC objection to @coinbase activity has several holes. Even if the court agrees with the SEC's main argument (investment contracts do not require legal terms), the SEC's case should still be dismissed.

As we discussed briefly in August, the SEC's concept of… https://t.co/RTzlutSM9t

— Miles Jennings (@milesjennings) October 3, 2023

Jennings added that even if the court agreed with the regulators on the main dispute over investment contracts, he believes the case “should still succeed” because he believes the SEC's definition of an investment contract has an “infinite scope.”

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