Coinbase: Digital assets on the platform are not within the jurisdiction of the SEC

Author: Nikhilesh De, CoinDesk; Translation: Song Xue, Blocking

US cryptocurrency exchange Coinbase claimed in its first legal response to regulatory agency lawsuits that the digital assets listed on its platform are not under the jurisdiction of the US Securities and Exchange Commission (SEC).

The SEC filed a lawsuit against Coinbase earlier this month, accusing the exchange of offering more than a dozen unregistered securities through its wallet or trading platform. In its response submitted earlier on Thursday, Coinbase claimed that these cryptocurrencies are not investment contracts and are therefore not securities.

Coinbase had previously argued this point in public statements such as tweets and blog posts, but Thursday’s filing further detailed the company’s position: cryptocurrencies on the exchange’s secondary market platform are not part of any arrangement where the issuer sells assets bound by contracts, essentially using the Howey standard set by the Supreme Court.

The document stated that the token issuer has no obligation to investors.

The document states: “Because Coinbase has no such obligations in its secondary market transactions and Coinbase buyers receive value from the goods purchased and traded through these transactions, rather than from the enterprise that created them, these transactions are not securities transactions.”

Some documents continue to reiterate Coinbase’s public statements, claiming that current SEC Chairman Gary Gensler changed his position on regulating cryptocurrency authorities during his term from April 2021 to mid-2022; stating that the company has requested regulation; and pointing out that Congress has begun to consider cryptocurrency regulation issues.

The document states: “Even if the assets and services identified by the SEC are properly within its existing regulatory authority, this action must be dismissed because it violates Coinbase’s due process rights and constitutes a serious abuse of process.” “Over the years, Coinbase has voluntarily accepted oversight by multiple overlapping regulatory agencies, complied with public and limited formal guidance from the SEC, senior SEC staff, and the courts regarding the applicability of securities laws to its industry, and requested guidance from the SEC on how it believes federal securities laws apply to the digital asset industry, as the SEC’s actions reflect its evolving but undisclosed views on its own authority.”

The document states, “The U.S. Securities and Exchange Commission has chosen to take enforcement action on rulemaking.”

The rest of the document contains a point-by-point response to the SEC’s lawsuit.

In another filing submitted to the judge overseeing the case, Coinbase claimed that its due process rights were violated when the SEC brought the lawsuit and that the SEC’s lawsuit may violate the “serious questions” doctrine. The company requested that the judge allow it to apply for judgment and set a seven-week schedule for its motion, the SEC’s opposition, and its reply to the opposition.

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