The U.S. Securities and Exchange Commission (SEC) has been accused by Coinbase of overreaching its jurisdiction by labeling certain cryptocurrencies listed on the exchange as securities. In its latest attempt to nullify a lawsuit filed by the SEC, Coinbase has challenged the regulator’s authority and the scope of its definitions.
On October 24, Coinbase submitted a filing in a New York District Court, criticizing the SEC’s broad interpretation of securities. The exchange contended that the specific cryptocurrencies they offer are beyond the regulatory scope of the SEC. Furthermore, Coinbase asserted that the SEC is attempting to drastically enlarge its jurisdiction, encompassing nearly all investment activities—a prerogative that, according to Coinbase, only Congress holds as per the major questions doctrine.
Echoing this sentiment, Coinbase’s chief legal officer, Paul Grewal, on an October 24 post, stated that the definitions used by the SEC are excessively unrestricted.
This recent move by Coinbase is a rebuttal to the SEC’s October 3 response, in which the regulatory body urged the court to dismiss Coinbase’s plea to have the case thrown out. The SEC maintained its stance, emphasizing that various cryptocurrencies listed by Coinbase can be deemed as investment contracts based on the Howey test.
The origins of the dispute date back to June 6 when the SEC initiated a lawsuit against Coinbase. The regulatory agency alleged that the exchange contravened U.S. securities regulations by listing certain tokens viewed as securities without the necessary registration.
In response, Coinbase filed a motion on June 29, asserting that the SEC was overstepping its boundaries and infringing upon the exchange’s due process rights.
The case’s fate now rests in the hands of Judge Katherine Polk Failla. She might direct both Coinbase and the SEC to present their arguments in court verbally before determining the course of action—whether to deliver a judgment, dismiss the lawsuit, or proceed to a jury trial.
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