In its legal rebuttal to the lawsuit filed by the U.S. Securities and Exchange Commission (SEC), Coinbase Global Inc
Earlier in June, the SEC initiated legal proceedings against Coinbase, accusing the exchange of offering about a dozen cryptocurrencies that were not registered securities.
Coinbase, in court documents submitted on Thursday, contended that the cryptocurrencies in question do not qualify as investment contracts.
Therefore, they should not be classified as securities.
The document suggests that Coinbase's secondary market does not involve promoters selling an asset associated with a contract.
This is an argument that invokes the Supreme Court's Howey precedent.
"The issuers of the tokens owe no obligations to investors," the court documents state.
It further elaborates, "Because no such obligations are carried in the transactions over Coinbase's secondary market exchange, and because the value that Coinbase purchasers receive through these transactions inheres in the things bought and traded rather than in the businesses that generated them, the transactions are not securities transactions."
Coinbase further argued that SEC Chair Gary Gensler altered his opinion concerning the regulator's jurisdiction over cryptocurrencies between April 2021 and mid-2022.
Coinbase has also highlighted that it has been actively seeking regulation and pointed out that Congress has begun to address cryptocurrency regulation.
"Even were the SEC correct that the assets and services it identifies are within the scope of its existing regulatory authority, this action must be dismissed on the independent grounds that it violates Coinbase's due process rights and constitutes an extraordinary abuse of process," the filing asserted.
It further stated, "For years, Coinbase has voluntarily submitted to regulation by multiple overlapping regulatory bodies, has adhered to the public and limited formal guidance from the SEC, senior SEC Staff, and the courts about the application of securities law to its industry, and has begged the SEC for guidance about how it thinks the federal securities laws map onto the digital asset industry as the SEC's actions reflected an escalating but undisclosed change in its own view of its authority."
