SEC opposes Coinbase’s bid to dismiss lawsuit over crypto securities

• The SEC has urged the judge to reject Coinbase’s motion to dismiss the lawsuit, reiterating that some crypto qualify as securities under the Howey Test.
• Coinbase’s legal chief dismissed the SEC’s arguments as “more of the same old same old.”

The United States Securities and Exchange Commission (SEC) has taken a firm stance in its ongoing legal battle with cryptocurrency exchange Coinbase.

In a 3 October filing with the New York District Court, the SEC has urged the judge to reject Coinbase’s motion to dismiss the lawsuit, reiterating its assertion that some of the cryptocurrencies listed on the exchange qualify as securities under the Howey Test.

According to the SEC, crypto asset issuers, including those listed on Coinbase, encouraged investors to expect the value of their investments to rise based on the issuer’s plans to develop and maintain the asset’s value. This aligns with the criteria set by the Howey Test, which determines whether an asset qualifies as a security.

The SEC further contends that Coinbase was fully aware of this classification and acknowledged it in its submissions to the regulatory body. This suggests that Coinbase was cognizant of the fact that certain cryptocurrencies it offered were indeed securities and, as such, subject to SEC registration.

The SEC Coinbase saga poised for more developments

Coinbase has previously attempted to argue the “major questions doctrine,” asserting that the SEC lacked authority over the crypto market until Congress explicitly granted it.

However, the SEC has refuted this claim, emphasizing that it hasn’t assumed any new powers beyond what the federal securities laws already permit it to do.

In response to the SEC’s filing, Coinbase’s legal chief, Paul Grewal, took to Twitter on October 3. Grewal dismissed the SEC’s arguments as “more of the same old same old” and reiterated Coinbase’s position that the assets it lists are not securities and fall outside the SEC’s jurisdiction.

He went so far as to suggest that, based on the SEC’s arguments, items like Pokemon cards, stamps, and Swiftie bracelets could also be classified as securities.

The @SECgov just filed its opposition to our motion to dismiss their case against @Coinbase. It’s more of the same old same old. But don’t just take my word for it – take a look for yourself. 1/7 https://t.co/QMdkRoiq0V

— Paul Grewal (@iampaulgrewal) October 3, 2023

XRP case request by the SEC denied

Meanwhile, a federal judge has denied the SEC’s request to appeal its earlier loss in the Ripple [XRP] case, involving the XRP token. District Judge Analisa Torres ruled that the SEC had not met the legal burden to demonstrate controlling questions of law or substantial grounds for differences of opinion.

While this is not a complete loss for the SEC, as the judge has set an April 2024 trial date for remaining issues, it could potentially appeal the overall case later.