Coinbase Challenges SEC’s Regulatory Ambit in Crypto

Coinbase has responded to the SEC lawsuit, slamming the regulator for “radically” expanding its authority.

SEC Eagles trying to go after Coinbase.
Created by Kornelija Poderskytė from DailyCoin
  • Coinbase has filed its last response to the SEC lawsuit. 
  • Coinbase wants the court to toss the regulator’s lawsuit. 
  • The exchange questioned the SEC’s regulatory authority over crypto. 

The U.S. Securities and Exchange Commission (SEC) has found itself on the receiving end of a court filing disputing its perceived “regulation-by-enforcement” approach meant to target and punish crypto exchanges in the wake of the FTX collapse.

On October 24, crypto exchange Coinbase made the last court filing in its motion to toss a lawsuit by the securities regulator, arguing in part that the SEC’s complaints were beyond the ambit of the regulator’s authority.

SEC’s Authority “Limited to Securities Transactions”

Per the document filed at the New York District Court, the legal team representing Coinbase submitted that the SEC erred in defining what constitutes a security, adding that the cryptocurrencies listed on the exchange don’t fall under the commission’s purview.

According to the lawyers, cryptocurrencies are investment assets but don’t qualify as securities unless their offerings come with contractual claims promising future profits, and the SEC has failed to prove that transactions on Coinbase confer such claims.

“The SEC’s authority is limited to securities transactions. Not every parting of capital with a hope of gain qualifies, and trades over Coinbase are only securities transactions if they involve ‘investment contracts.’ The transactions at issue here do not,” the filing read.

Coinbase chief legal officer Paul Grewal echoed similar assertions on Twitter (X).

The lawyers reiterated that the SEC had departed from precedent “in the service of a radical expansion of its own authority,” claiming oversight over all investment activity in the U.S. 

SEC’s Enforcement Power Questioned

Apart from disputing the SEC’s position on whether cryptocurrencies are securities, the Coinbase legal team raised grave concerns about the commission’s regulatory guidance.

Per the lawyers, the securities watchdog is wielding enforcement power without a regulatory process under the pretext of implementing a Congressional mandate.

Read why Binance and CZ want the court to dismiss the CFTC’s lawsuit against them:
Binance, Changpeng Zhao Renew Bid to Toss CFTC Lawsuit

Stay updated on the court order mandating the SEC to review Grayscale’s Bitcoin ETF application:
SEC Mandated to Review Grayscale’s Bitcoin ETF Application

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

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Brian Danga

Brian Danga, a Kenyan crypto reporter, is dedicated to delivering breaking news and updates from the cryptocurrency world. With a background as a Web3 writer and project manager, he recognizes the importance of unbiased reporting. Holding an LLB degree from the University of Nairobi, Brian's analytical skills contribute to his accurate news reporting. His personal interests include cooking, watching documentaries, reading, and engaging in intellectual discussions.