Coinbase Global on Friday asked a judge to end the US Securities and Exchange Commission’s lawsuit accusing the world’s largest publicly traded cryptocurrency exchange of violating federal securities laws.
In a filing in federal court in Manhattan, Coinbase said the SEC had no authority to pursue its lawsuit because the digital assets and services it objected to did not qualify as securities, and said the agency has overreached.
“Our core argument is simple – we do not offer ‘investment contracts’ as that term has been construed by decades of Supreme Court and other binding precedent,” Coinbase Chief Legal Officer Paul Grewal said in a post on X, formerly Twitter.
A spokesperson for the SEC declined to comment beyond their public filings.
Coinbase was sued by the SEC in June, and accused of operating illegally as a national securities exchange, broker, and clearing agency without registering with the regulator.
Growing friction between the crypto sector and the top US markets regulator has escalated amid a series of lawsuits the SEC has filed against the world’s largest crypto platforms.
The SEC has said the platforms needed to register and operate in a manner akin to those dealing in stocks or bonds, while the crypto sector says that new legislation is needed. Firms are closely watching the litigation between the SEC and Coinbase, with some onlookers deeming it an “existential” clash.
In the last month, two federal judges in Manhattan diverged, in SEC lawsuits against crypto firms Ripple Labs and Terraform, over whether the regulator overstepped its authority by trying to regulate the sector.
Coinbase leaned on the recent Ripple matter in Friday’s filing, noting the SEC’s lawsuit hinges on the type of transactions that the judge deemed outside of the regulator’s jurisdiction.
Shares of Coinbase fell 3.8 percent on Friday.
© Thomson Reuters 2023