In a bold move, Coinbase has requested the court to throw out a lawsuit lodged against it in June by the U.S. Securities and Exchange Commission (SEC).
The San Francisco-based digital asset exchange said in an August 4 court filing that the SEC’s “claims must be dismissed” because “the subject matter falls outside the agency’s delegated authority.” Coinbase noted that Judge Analisa Torres’ recent decision with Ripple bolsters their argument.
“SEC Violated Due Process”
Lawyers representing Coinbase have filed a motion to dismiss the SEC lawsuit. They accused the SEC of exceeding its regulatory authority and engaging in regulatory overreach.
The regulator in June slapped America’s largest crypto exchange with a suit, alleging that it operated for years as an unlicensed securities exchange. The SEC even went ahead to name 13 tokens as examples of coins it believed qualified as securities.
Coinbase is now arguing that none of the digital assets and services it offers are securities.“Because as a matter of law none of them [crypto assets] are, the claims must be dismissed,” reads the filing.
“The transactions over Coinbase’s platform and Prime are not, and do not involve, contractual undertakings to deliver future value reflecting the income, profits, or assets of a business. They are commodity sales, with the obligations on both sides discharged entirely the moment the digital token is delivered in exchange for payment,” the filing added.
Coinbase further said the SEC had “violated due process, abused its discretion, and abandoned its own earlier interpretations of the securities laws” in claiming certain regulatory control over the exchange. According to the crypto company, the SEC’s challenges to its staking program “fail as a matter of law.” Coinbase has asked the court to dismiss the case, arguing the SEC’s enforcement action was “punitive” and characterized an overreach in its statutory authority granted by Congress.
Similarity To XRP Lawsuit
Coinbase’s motion to dismiss additionally cited last month’s verdict in the Ripple vs SEC case, indicating that the underlying facts were “substantially identical to those alleged here.”
Judge Torres determined that Ripple’s sales of XRP on exchanges weren’t securities transactions, but the firm’s direct sales to institutional customers were.
The SEC this year has amplified its crackdown on the crypto sector. This is largely due to its chairperson Gary Gensler’s assertions that most crypto platforms are selling unregistered securities to clients. Besides Coinbase, the regulator has also taken legal action against Binance, Kraken, and Genesis. The SEC has also gone after Tron’s Justin Sun, Terraform Labs’ Do Kwon, and Richard Heart under Gensler’s watch.