- Coinbase has filed to dismiss the SEC case against it.
- The exchange slams the agency for reaching beyond its Congressionally allowed authority.
- A legal commentator has called on Congress to step into the case.
With the future of the crypto industry in the U.S. potentially hanging in the balance, recent court documents reveal that Coinbase has made its move. Can Coinbase put an end to the SEC’s crypto enforcement barrage?
Coinbase Disputes the SEC’s Authority
On June 6, the U.S. SEC shocked the crypto space by filing a lawsuit against Coinbase, accusing the exchange of offering trading in unregistered securities and operating an unlicensed broker and clearing agency. After weeks of dalliance, as the SEC initially intended to strike Coinbase’s defense, the crypto exchange has filed its motion to dismiss the lawsuit.
In a filing on Friday, August 4, Coinbase asked the U.S. District Court for the Southern District of New York to toss its legal battle with the SEC under a motion for judgment on the pleadings that will compel the judge to consider the SEC’s complaint and Coinbase’s attachment-laden response.
Outlining reasons for the case to be dismissed, the crypto exchange argued that crypto exchanges are outside the SEC’s jurisdiction on the most fundamental basis. Supporting its claims, Coinbase points to a 2021 statement from SEC Chair Gary Gensler asking Congress for the power to regulate crypto exchanges. Additionally, the firm cites recent efforts in Congress to delegate authority over crypto markets and exchanges.
Following this reasoning, Coinbase argued that the SEC could only pursue the case if it could point to relevant transactions in digital assets on its platform or using its services that involved investment contracts. However, Coinbase claims that the SEC fails to identify any such transactions.
The exchange again raised the Major Questions Doctrine, noting that with the law unclear on the SEC’s role in crypto markets, the court should give deference to Congress. Coinbase attached ten exhibits to its filing, including references to decisions in the SEC case against LBRY and Ripple.
Despite Coinbase’s efforts to speed things up, it is worth noting that the crypto exchange will still have to wait a while to get a response from the SEC.
A Two Month’s Wait
The SEC has a two-month window to respond to Coinbase’s motion to dismiss, with an answer expected on or before October 3. Coinbase had initially pushed for a response in September but was turned down by the judge.
In the meantime, third parties interested in supporting Coinbase’s motion to dismiss have a week to do so, with the court setting the deadline for August 11.
Legal commentator and securities lawyer James “MetaLawMan” Murphy has called on Congress or at least the House Financial Services Committee to file an amicus brief in support of Coinbase, arguing that it could significantly sway the court and put an end to the SEC’s crypto enforcement rampage that has shrouded the industry in uncertainty.
On the Flipside
- The SEC has significant time to prepare its response to Coinbase’s filing.
- Gensler maintains that there is no need for fresh rules for the crypto market.
Why This Matters
Coinbase is the largest crypto exchange in the U.S. The exchange’s legal battle with SEC will likely set precedents that could decide the fate of the crypto industry in the U.S.
Read this to learn more about Coinbase’s interactions with the SEC before the case and what it reveals about the future of crypto in the U.S.:
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