The SEC is attempting to expand its regulatory purview in a way not authorized by Congress, Coinbase argued
Coinbase has filed a reply to the US SEC to get an enforcement action against the exchange rejected, contending that the tokens do not necessarily represent the definition of an investment contract.
The Securities and Exchange Commission is attempting to expand its regulatory purview in a way not authorized by Congress, Coinbase contended, taking an approach that was anticipated by insiders.
The Securities and Exchange Commission first sued Coinbase, along with Binance, in early June. Coinbase moved to dismiss the suit in August, with the exchange’s CLO telling CoinDesk at the time that they hoped U.S. regulators would be compelled to “establish clear rules of the road that everyone could understand and follow.”
As the Securities and Exchange Commission now would have it, an investment contract exists if someone parts with capital and expecting that her purchase will gain in value, Coinbase contended in the filing. The Securities and Exchange Commission proposes this shift from precedent in the service of a radical expansion of its own authority. It claims authority over essentially all investment activity—and thus the right to define its own regulatory ambit, restricted only by its own ambition.
Coinbase argues that assets such as paintings, baseball cards, and crypto currencies can be investments but are not securities unless they offer a contractual claim related to a business’ future profits or assets, and the Securities and Exchange Commission has not shown that trades on Coinbase’s platform confer such claims or a financial stake in an enterprise.
Were the SEC’s position accepted, countless software-driven services would be securities. That would be another radical expansion of SEC authority with no grounding in precedent, Coinbase stated in its filing.
The SEC faces judicial challenges in its crypto industry lawsuits, with significant rulings weakening its stance that most crypto currencies are securities.