Coinbase, the prominent crypto exchange, has made a daring move to dismiss a lawsuit filed against it by the U.S. Securities and Exchange Commission (SEC), calling it “an extraordinary abuse of process.” The SEC had accused Coinbase of enabling unregistered trading of 12 digital tokens, which it classified as securities. However, the cryptocurrency exchange is refusing to back down.
Arguing that the SEC’s application of securities laws to certain digital tokens deviates wildly from established legal norms, Coinbase’s chief legal officer, Paul Grewal, fired back. According to him, the SEC’s allegations “overstep the bounds of existing law” and hence should be thrown out.
Coinbase has raised serious concerns over the SEC’s interpretation of securities laws, suggesting that the watchdog might be stepping beyond its legal remit. The exchange’s resolute stand to challenge the SEC’s lawsuit with a motion to dismiss is a clear demonstration of its determination.
The crypto exchange maintained that the assets under scrutiny are not securities. A critical aspect of the SEC’s security definition includes investment contracts, which involve transactions where investors expect profits mainly from the efforts of others. The SEC identified 12 tokens as securities, including SOL, ADA, MATIC, SAND, FLOW, ICP, NEAR, and DASH.
Coinbase’s lawyers point out that in 2021, the SEC declared Coinbase’s registration statement effective, which allowed the company to sell its shares to investors and trade more than 240 tokens, including six of the 12 tokens now in dispute. The latest move adds fuel to the fiery debate about regulatory oversight in the dynamic world of crypto.