Coinbase Global, the largest U.S. cryptocurrency exchange, is making an attempt to put a stop to the U.S. Securities and Exchange Commission’s (SEC) lawsuit that accuses Coinbase of violating federal securities laws. According to Reuters, Coinbase claims that the SEC has no authority to pursue its lawsuit because the digital assets and services it objected to do not qualify as securities.
Paul Grewal, Coinbase’s Chief Legal Officer, commented on the discrepancies between the SEC’s requirements and the assets provided by Coinbase: “Our core argument is simple – we do not offer ‘investment contracts’ as that term has been construed by decades of Supreme Court and other binding precedent.”
The SEC accuses Coinbase of having operated illegally as a national securities exchange, broker, and clearing agency without registering with the regulator. Growing friction between the crypto sector and the SEC has been escalating with a series of lawsuits filed against major crypto platforms. The SEC has been pressing the crypto sector to register and accept to be governed like those dealing in stocks or bonds.
The showdown between Coinbase and the SEC has been seen by many as an ‘existential’ clash for the crypto sector and is being closely watched by other firms in the space. In its statement, Coinbase even referred to a recent Ripple lawsuit to further strengthen its argument that the SEC’s jurisdiction does not cover the type of transactions in question.
On Friday, after the filing was made, shares of Coinbase fell 3.8%. The SEC had no comment on the filing. It remains to be seen whether Coinbase’s motion will be successful and, if so, how it will influence the crypto industry.