By Brenda Collins
A recent report revealed that the United States Securities and Exchange Commission released a preview of its lawsuit against the Coinbase exchange. However, a famous crypto lawyer James Murphy, aka MetaLawMan, commented that the agency’s argument in the case is not particularly strong.
According to the report, the American SEC sent a letter summarizing its arguments against Coinbase exchange to the Judge presiding over the case on July 7.
In the letter, the regulator claimed that Coinbase is a huge exchange with a team of sophisticated lawyers who knew that the SEC securities rules could be applied to its business operation.
In plain words, the SEC claimed that Coinbase knew it could be violating securities rules by operating, yet it intentionally went ahead, anyway. The SEC reportedly presented the letter to counter Coinbase’s petition to gesture for judgment on pleadings recently.
However, the popular crypto law expert, James Murphy, commented on June 9 on his Twitter page that the SEC’s lawsuit against the giant exchange lacks confidence as the arguments are not strong enough.
Murphy explained that although SEC can oppose the motion, it wouldn’t attempt to delay paying attention to the problems the exchange has raised. Hence, this provides a silver lining of resolution in the confusing cloud of the law case.
Murphy Says The SEC’s Argument Is Weak
In addition, Murphy pointed out that the SEC’s assertions in the lawsuit are weak as they are based on previous cases, such as the one between the SEC and LBRY in November last year.
The SEC reportedly accused LBRY, a token issuer, of selling crypto tokens as unregistered securities. In the lawsuit, the judge allegedly failed to differentiate investors who purchased crypto from a secondary market from the one that bought it directly from the issuer.
Meanwhile, the SEC uses the lawsuit as its argument in the current case against Coinbase, stating that because crypto is bought from a secondary platform such as Coinbase does not make it less a securities.
However, Lawyer Murphy argued that the court that ruled the case used as precedent did not classify cryptos bought on secondary platforms as securities. Hence, he claimed the case did not support the SEC’s argument in a lawsuit against Coinbase.
Furthermore, MetaLawMan argued that the SEC depends on an unrelated case that was issued and won against a cryptocurrency token issuer and not a secondary trading marketplace.
Murphy added that the regulator has to provide a more applicable case law at the full briefing as this particular one has no ounce of strength in it.
Coinbase Came Up With Major Questions Doctrine
Meanwhile, Coinbase recent filing revealed that the SEC does not have the backing of Congress to probe its operations. Hence, the exchange tends to defend itself with the Major Questions Doctrine backed by the Supreme Court.
For context, the Major Questions Doctrine is a Supreme Court assertion that a regulatory agency needs the backing of Congress to decide a case that is of significant national importance.
In its defense filing, Coinbase pointed out that Gary Gensler, the SEC chair, stated in 2021 that it has presented a proposal before Congress for approval to regulate crypto exchanges.
However, the chair later declared that Congress did not authorize the proposal, meaning that only Congress can decide issues relating to the crypto exchanges since there is no standing regulation for the sector, according to Coinbase filing.
Furthermore, Paul Grewal, the chief attorney representing Coinbase, stated that the letters from SEC are bypassing many vital questions. He added that the SEC shunned the warning the Supreme Court issued against meddling in regulatory questions restricted to Congress alone.
Commenting on the latest development, Murphy said it is unlikely for the SEC to successfully cancel the Major Questions Doctrine defense that Coinbase put up. The pre-motion hearing on the lawsuit would come on July 13, according to the report.
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