United States-based cryptocurrency exchange Coinbase has filed a motion to dismiss a lawsuit brought by the Securities and Exchange Commission (SEC) in June.
In an Aug. 4 filing with U.S. District Court for the Southern District of New York, lawyers for Coinbase filed a motion for judgment, claiming the SEC had “violated due process, abused its discretion, and abandoned its own earlier interpretations of the securities laws” in asserting certain regulatory authority over the crypto exchange. The legal team cited precedent from the SEC v. Ripple case, in which a judge ruled that the XRP token largely did not qualify as a security by the commission’s existing standards.
Specifically, Coinbase’s filing disputed that transactions of the 12 tokens at issue in the SEC case met the definition of “investment contracts” under the Howey test and the exchange was operating as an unregistered broker, and argued the commission’s challenges to its staking program “fail as a matter of law”. The crypto firm has requested the court dismiss the case, arguing the SEC’s enforcement action was “punitive” and represented an overreach in its authority granted by Congress.
By ignoring that precedent, the SEC has violated due process, abused its discretion, and abandoned its own earlier interpretations of the securities laws. By ignoring that precedent, the SEC has trampled the strict boundaries on its basic authority set by Congress. 2/3
— paulgrewal.eth (@iampaulgrewal) August 4, 2023
The SEC filed the lawsuit against Coinbase on June 6, roughly three months after the exchanged received a Wells notice from the federal regulator. The firm has consistently denied the SEC’s allegations on its activities potentially violating securities laws, and announced on Aug. 3 during an earnings call it would be filing a motion to dismiss.
In addition to Coinbase, the SEC is pursuing enforcement actions against Binance and Hex founder Richard Heart. U.S. lawmakers recently passed legislation through committees that could restructure the commission’s authority over digital assets if signed into law.