Coinbase has asked the court to dismiss a high-profile lawsuit by the Securities and Exchange Commission (SEC). Earlier this month, the Securities and Exchange Commission issued accusations that the world’s second largest crypto exchange failed to properly register its business.
The SEC case is based on the claim that Coinbase’s tokenization and staking services are securities. However, Coinbase argues that they are not, criticizing what it calls the “fundamental problem” in this case. If rejected, it is difficult to calculate the potential repercussions for the industry.
Coinbase argues that it does not trade in securities
As reported in Bloomberg and elsewhere on Thursday, prof Court filing From the law firm Wachtell Lipton Rosen & Katz on behalf of the exchange, he argues that the assets in question are not under the jurisdiction of the SEC. it continues:
“The SEC may pursue this enforcement action only if the relevant transactions in the digital assets and services identified in the complaint are considered “investment contracts” and therefore “securities” within the meaning of the Securities Act of 1933 (“Securities Act”) and the Securities Act of 1934 (the “Stock Exchange Act”). Because legally none of them are, the allegations must be dismissed.”
The exchange also notes that senior SEC officials have previously stated that Bitcoin and Ether, which are available for trading on Coinbase, are not securities. However, in its actions against the two exchanges, the regulator identified several tokens that fit the definition earlier this month.
The key to Coinbase’s claim that it does not trade in securities is the definition itself. Its lawyers argue that the lack of an ongoing contractual relationship is fatal to the SEC’s claim. They stress that the tokens available for trading on the platform are different from typical securities. The latter involves investors who pay money in return for the promise of future profits or income.
The Saudi Electricity Company’s actions shook the industry
The SEC action against Coinbase came a day after similar accusations were filed against its largest competitor, Binance. The two back-to-back actions against two of the industry’s biggest firms made waves. Coinbase, one of the few publicly traded companies in the industry, saw its shares drop 18% following the news.
Recently, the company has been moving away from its US base. This week, the exchange praised the work of Canadian lawmakers in trying to make the country an attractive destination for digital asset firms.
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