By Michael Scott
Coinbase filed a motion seeking court to dismiss the lawsuit filed by the US Securities and Exchange Commission (SEC). Coinbase, through its legal team led by Paul Grewal, submits that even if the allegations in the lawsuit turned true, the plaintiff lacks a valid legal claim.
Coinbase Reignites Battle Against SEC
The motion reignites the ongoing legal battle pitting Coinbase and SEC under the leadership of Gary Gensler. The plea filed by Coinbase’s legal team on Thursday, June 29, questions the legal claim SEC relies upon to interpret the securities laws. The motion filed by the crypto exchange informs the Southern District of New York court that the securities watchdog overstepped its legal authority.
The latest submission underscores the devotion of the US’s largest crypto exchange by transaction volume to challenge the SEC charges initiated early this month. The legal team representing Coinbase emphasizes that the absence of a legal claim defeats the basis of the SEC filing the lawsuit even if proven true.
Coinbase Petitions for SEC Lawsuit Dismissal
The filing indicated that even if the cryptos and services identified by the SEC are within the agency’s existing regulatory scope, the court should dismiss the legal action. The filing added that the court should consider that SEC’s lawsuit is an extraordinary abuse of process as it contravenes the due process rights of Coinbase.
Coinbase is challenging the SEC’s submission that accuses Coinbase of facilitating unregistered trading featuring 12 cryptocurrencies labeled securities. The crypto exchange, led by its chief executive Brian Armstrong contests the allegations. The executive reiterates that SEC relies upon securities laws to portray several digital tokens in a manner deviating from the existing regulatory framework.
SEC’s Claims Extending Beyond the Authorized Scope
Coinbase chief legal executive Paul Grewal tweeted on Thursday, June 29, arguing that SEC claims constitute an overreach. The claims extend beyond the existing law and thus constitute sufficient grounds for the court to dismiss the lawsuit.
A revisit to the allegations captured in the SEC’s filing to the court challenged by Coinbase is the definition of security. SEC defines security to include investment contracts.
The Supreme Court interprets investment contracts using the Howey test as including transactions involving individuals investing money in common enterprises. The individuals anticipate drawing profits primarily from the efforts undertaken by others.
The SEC identifies 12 tokens as securities, including Polygon, Solana, Cardano, The Sandbox, Flow, Near, and Dash.
Coinbase Questions SEC Decision to Overlook Clean Bill Pronouncement?
Coinbase lawyers led by Grewal cite 2021 evidence where SEC termed the registration statement issued by the commission to the Armstrong-led exchange as effective. The lawyers indicate that the SEC permitted the company to invite investment by selling shares when Coinbase went public.
Grewal indicated that the approval granted by SEC to Coinbase involved in-depth discussions in an extensive review process spanning several months. The approval permitted Coinbase to facilitate the trading of 240 tokens on the spot exchange, including six of the dozen SEC disputes, and label their securities.
Coinbase Deploys Creative Defence Approach to SEC’s Lawsuit
The move by Coinbase is attracting scrutiny from legal professionals. The exchange answers the SEC’s complaints through several defenses, including the submission that the action by the agency is an abuse of discretion. A fundamental challenge with the SEC’s complaints is the submission that the recognition by the SEC’s chair was effectively registered. It constitutes ground Coinbase seeks judgment on pleadings filed on Thursday, June 29.
MetaLawman views the Coinbase tactic as a creative strategy to advance through a motion-seeking pleading captured in the response 40 days before the deadline. The legal expert indicates that Coinbase seeks access to documents that would facilitate the cause placed before Judge Katherine Failla through the answer.
MetaLawMan holds that Judge Katherine may consider factual allegations captured in the documents accompanying the complaint. Alternatively, the judge may review other pleadings submitted in the case, including the Coinbase answer to the complaint.
Editorial credit: 24K-Production / Shutterstock.com