Coinbase issued its first legal response to the Securities and Exchange Commission’s (SEC) lawsuit, early yesterday Thursday, 29 June.
The regulatory watchdog had sued Coinbase at the start of the month accusing it of offering a dozen of the cryptocurrencies through its wallet or trading platforms as unregistered securities.
Arguing that the regulator violated its due process, Coinbase claimed that the digital assets listed on its platform fall outside the SEC’s purview. Its response also stated that these cryptos were not investment contracts and therefore could not be tagged as securities.
The response utilised the Supreme Court’s Howey Case as an example to make its statements.
Highlighting that issuers of the tokens owe no obligations to investors, the filing said: “Because no such obligations are carried in the transactions over Coinbase’s secondary market exchange, and because the value that Coinbase purchasers receive through these transactions inheres in the things bought and traded rather than in the businesses that generated them, the transactions are not securities transactions.”
It stated that over the years, Coinbase had made it a point to voluntarily submit to regulation by multiple overlapping regulatory bodies. The exchange’s CEO Brian Armstrong had also called out the lack of clarity saying that the SEC and CFTC (Commodity Futures Trading Commission) have made conflicting statements, where they “don’t even agree on what is a security and what is a commodity”.
The exchange’s filing consists of a point-by-point answer to SEC’s lawsuit. Claiming that the “SEC has chosen” to pursue enforcement actions over rule-making, the filing added that Coinbase had:
“…begged the SEC for guidance about how it thinks the federal securities laws map onto the digital asset industry as the SEC’s actions reflected an escalating but undisclosed change in its own view of its authority.”
While the exchange had responded to the SEC in a number of public statements on Twitter and blog posts before, Thursday’s statements were the first legal response from Coinbase. Back on 6 June, when the SEC had filed the lawsuit, Brian Armstrong had assured the industry by saying:
“Regarding the SEC complaint against us today, we’re proud to represent the industry in court to finally get some clarity around crypto rules.”