Coinbase files motion to dismiss SEC lawsuit

Major crypto exchange Coinbase is currently seeking to dismiss allegations made against it by the United States Securities and Exchange Commission (SEC).

On August 4, attorneys representing Coinbase filed a motion to dismiss in the U.S. District Court for the Southern District of New York, claiming that the exchange does not offer securities and operates outside the jurisdiction of the SEC in terms of regulations.

In June, the SEC sued Coinbase for “operating as an unregistered securities exchange, broker-dealer and clearing agency.”

Coinbase Bases Case Dismissal on Ripple Vs. SEC, Among Other Factors

In its motion to dismiss on Friday, Coinbase argues that trading the 12 tokens highlighted in the SEC case does not qualify as a securities transaction based on existing US laws, including the Howey test.

According to the exchange, the purchase of these tokens is synonymous with possession of baseball cards in that there is no contractual obligation for the baseball card company to work towards an appreciation of the value of these cards. as in the case of the purchase of shares of the company.

A statement from the filing read:

….transactions on the Coinbase and Prime platform are not and do not imply contractual commitments to provide future value reflecting any company’s revenue, earnings or assets. These are commodity sales, with the obligations of both parties being fully discharged at the time the digital token is delivered in exchange for payment. The SEC’s complaint does not allege otherwise.

Additionally, Coinbase also refers to Ripple v. SEC stating that the arguments made by the commission in both cases are quite similar.

In July, US Judge Analisa Torres ruled that programmatic sales of XRP to retail investors did not violate any existing securities law. Using this case example, Coinbase supports its petition, stating that “the secondary market sales of all these tokens (cryptocurrencies) are all asset sales with no post-sales contractual obligations.”

Additionally, the crypto exchange is also taking on SEC accusations of operating as an “investment contract broker” due to its non-custodial wallet service. Coinbase states that the NEXO token highlighted in this particular scenario by the financial regulator is similar to the other 12 tokens as it does not grant any share in any company and cannot be qualified as a security.

Finally, Coinbase attorneys said the SEC’s claims against the exchange’s staking program are inadequate because Coinbase serves only as a staking medium, offering no management services to its staking clients.

Total crypto market cap valued at $1.22 trillion on the 4-hour chart | Source: TOTAL chart on

SEC Violated Due Process, Says Coinbase CLO

Commenting on Coinbase’s motion to dismiss, the exchange’s chief legal officer, Paul Grewal, on social media platform X, said that the SEC had discarded due process and ignored existing legal precedents following its lawsuit against the exchange.

According to Grewal, the SEC was operating outside of its jurisdiction as defined by the US Constitution. He said:

Our main argument is simple: we do not offer “investment contracts”, as this term has been interpreted by decades of Supreme Court and other binding precedents. By ignoring this precedent, the SEC violated due process, abused its discretion, and abandoned its own prior interpretations of securities laws. By ignoring this precedent, the SEC has trampled on the strict limits of its basic authority set by Congress”

According to the court’s scheduling order, the SEC is expected to file a response to Coinbase’s motion by Oct. 3, while there is an Aug. 11 deadline to submit all amicus briefs to the court. support of his file.

Featured image from Law Insider India, chart from Tradingview.

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