Coinbase has submitted a “final petition” to the court in its legal battle with the US Securities and Exchange Commission (SEC), arguing that tokens should not necessarily be classified as investment contracts and that the SEC has overstepped its regulatory boundaries. The company’s legal brief, filed on October 24 in the Southern District of New York, challenges the SEC’s assertions and criticizes its broad definition of securities. Coinbase argues that the SEC is attempting to assert jurisdiction over all investment activity, a power reserved for Congress.
The cryptocurrency exchange argues that cryptocurrencies should not be subject to the SEC’s regulation. In a plea to a federal judge to dismiss the lawsuit filed against it in June, Coinbase states that the SEC’s case should be dismissed at an early stage. The request asks the court to evaluate whether a legal ruling can be made based on the assumption that all the facts presented in the SEC’s complaint are accurate.
The Legal Battle and Potential Trial
If the case is not dismissed, Coinbase is eager to expedite the proceedings and head to trial as quickly as possible. The discovery phase, where both sides exchange evidence, could extend for up to a year, potentially pushing a trial date to at least the first quarter of 2025. However, Judge Failla, who is presiding over the case, has shown favor towards entities in the crypto industry in previous rulings.
In an October 24 blog post, Coinbase’s chief legal officer Paul Grewal responded to the SEC’s opposition to their motion for judgment, countering the SEC’s claims that their definitions of securities are all-encompassing. The company’s latest filing is a response to the SEC’s rebuttal on October 3, in which the SEC urged the court to deny Coinbase’s motion to dismiss.
Allegations Against Coinbase
The SEC sued Coinbase in early June, alleging that the exchange violated US securities laws by listing tokens that it considers securities without registering with the regulator. The SEC accused Coinbase of facilitating trading in unregistered securities and operating an unregistered exchange, broker, and clearinghouse. The SEC identified 13 tokens, including SOL and ADA, as securities in its complaint. The regulator also accused Coinbase of offering and selling unregistered securities through its staking program.
Coinbase sought to have the lawsuit dismissed in August, hoping that this legal action would encourage regulators to establish clear rules and guidelines for the cryptocurrency industry. The SEC, in its opposition filing, argued that Coinbase was trying to divert attention from its own shortcomings in legal arguments. The SEC maintained that certain tokens listed by Coinbase qualify as securities under the Howey test.
