Security regulators oppose the special treatment of crypto in the case of Coinbase
Digital assets should not be viewed as “unique,” nor should the move against Coinbase be viewed as “novel or unusual,” argues the Securities Regulators Association of North America.
On October 10, the US District Court for the Southern District of New York ruled in favor of the US Securities and Exchange Commission (SEC), arguing that digital assets of the North American Securities Administrators Association (NASAA) should not receive any special treatment. Regarding the application of securities laws.
TradFi Gray Hairs File Amicus Curiae *drum roll* SEC, in SEC Vs. Coinbasehttps://t.co/ukeHcfcX8B
NASAA landing page screenshot and story attached. Stay tuned pic.twitter.com/DczmmRVlm5
— Mikko Ohtama (@moo9000) October 10, 2023
In June, the SEC sued Coinbase, a publicly traded crypto exchange for violating federal security laws. Coinbase fired back, saying the digital assets and services it offered didn't qualify as securities and that the agency was overreaching.
However, NASA General Counsel Vincente Martinez argued that the SEC's position is not “new or unusual.”
“The SEC's theory in this case is consistent with the agency's longstanding public position. […] It is also well within the bounds of established law.
The agency argued that the SEC should not obtain express congressional authorization before implementing a rule based on digital assets.
The Hawaii experiment is enough.
One of the cornerstones of the case is expected to come from the judge's interpretation of the Hawaii test used to determine what qualifies as an investment contract. Coinbase argued that digital assets do not meet all the test conditions.
Martinez said the Hawaii test was designed to be flexible enough to incorporate all technological developments in the securities markets, including the securities traded and sold in the securities markets — similar to previous arguments by the SEC.
“The court must reject Coinbase's attempt to narrow and misapply the established legal framework to prevent them from entering into the same regulatory obligations as all participants in national securities markets,” Martinez said.
“The court should refrain from treating digital assets as somehow special.”
Crypto's influence is overstated.
Martinez took a swipe at Coinbase's argument, invoking the “principal questions doctrine,” saying that matters of major political or economic importance, such as the SEC's, require congressional approval.
“Coinbase casts the dubious ‘digital asset industry' as a ‘significant part of the US economy,'” Martinez said.
Related: SEC asks judge to dismiss Coinbase lawsuit
However, Martinez said digital assets cannot be considered a vital part of the U.S. economy because there is no practical economic use case or widespread adoption.
“With few exceptions, digital assets are not widely accepted as payment for goods or services and cannot be used to meet obligations to governments such as payments or taxes,” he wrote.
“As an asset class, digital assets are not economically viable,” he said.
“Coinbase describes the size and importance of this ‘industry', particularly the part that security regulators control.
NASAA's filing joins the SEC in asking the judge to dismiss Coinbase's attempt to dismiss the SEC's lawsuit.
Under the leadership of NASAA President Claire McHenry, NASA members are advocating for investor protection in an age of technological innovation. Learn more about our legislative and regulatory priorities in this changing landscape: pic.twitter.com/4Gs5XU0NDt
— NASAA (@NASAA) October 10, 2023
NASAA has 68 members, including securities regulators from all 50 US states, along with securities regulators in Canada, Mexico and several other US states.
“NASA and its members have a vested interest in this,” Martinez added.
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