In a recent development, the United States Securities and Exchange Commission has reportedly filed a fresh lawsuit against the US-based cryptocurrency Coinbase, requesting the presiding judge to disregard the defendant’s countermotion. However, Coinbase maintains its stand, set to file a response in disagreement.
The legal battle between the prominent Crypto exchange Coinbase and the US regulator, SEC, started earlier this year when the government financial agency slammed the crypto firm with a lawsuit accusing it of conducting illegal business that violates US securities laws. Nonetheless, Coinbase raised a countermotion, denying the allegations the SEC charged against it.
However, the report revealed the case just got more intense as the prosecutors filed a new motion against the defendant, which strongly opposed the countermotion the crypto firm raised, twisting the case further.
Coinbase Denies SEC’s Allegations
In the new lawsuit filed on Tuesday, the US SEC issued a counterargument where it called for the judge to dismiss Coinbase’s defense arguments on its allegations, further reiterating its charges against the crypto firm. According to the report, Coinbase Exchange issued its defense motion on June 29th against the SEC’s allegations.
In the crypto giant firm’s motion, it claimed that for a product to be considered an investment contract, certain factors must be satisfied, which includes offering users contractual rights to assets, income, or profits of a business operation or promise to give investors a portion of the future value of a business. However, Coinbase emphasized that none of its functions match the stated standards for investment contracts. Hence, it is not obligated to observe securities rules. Also, the Coinbase exchange claimed that the SEC had initially approved its operations without pointing out any potential irregularities.
SEC Request Court To Dismiss Coinbase Motion
However, the US regulator vehemently countered Coinbase’s defense, reiterating in its new countermotion that the crypto firm’s product offers are contractual investments that promise investors a sizable return on its business value in the future. In addition, the SEC argued that Coinbase exchange’s operations satisfied the requirements for investment contracts stated in the Howey test, which set a legal precedent for security-related cases.
Furthermore, the regulator added in its allegation that the motion filed by Coinbase has a flawed basis, claiming that courts usually consider many factors before using the Howey test’s standard, as well as commitment contracts, and do not mandate formal contracts as a requirement.
More so, the commission disregarded the exchange’s claims that the SEC had initially endorsed its conduct without issue and hence has no jurisdiction to observe the securities regulations. However, the SEC emphasized that the exchange was aware that some crypto assets listed on its platform could be possibly categorized as securities; hence, it claimed the lawsuit should have been a surprise for the exchange.
Coinbase Set To File A New Motion
Responding to the new development, Paul Grewal, the Chief Legal Officer at Coinbase, posted on Twitter addressing the SEC. In his tweets, Grewal pointed out that the SEC’s countermotion does not have the required legal backing, emphasizing that Coinbase exchange’s products are not contractual investments and, hence, the firm is not subjected to the securities regulations.
Furthermore, he highlighted that the enforcement action used by the SEC showed that the commission is disregarding the broader cryptocurrency community’s demand for more transparent and clearer regulatory regulations to guide crypto operations in the United States. Also, the chief legal officer asserted that the crypto firm aims to file another motion on October 24, 2023.
Meanwhile, while going through the rigorous legal battle with the US SEC, Coinbase exchange has reportedly taken further steps towards expanding its business across the globe as it backs a permit to operate in Singapore. Also, the SEC allegedly lost its appeal to file for a motion against Ripple Labs’ victorious ruling in their ongoing case. In conclusion, the commission was also recently accused of trespassing its legal jurisdiction in its lawsuit against Binance Exchange.
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