Coinbase Seeks Dismissal of SEC Lawsuit, Claiming Agency Has No Authority

Coinbase wants a judge to dismiss the Securities and Exchange Commission’s (SEC) case against it.

The cryptocurrency platform filed a motion Wednesday (June 28) in federal court arguing that the regulator does not have the authority to pursue its prosecution of Coinbase, part of the agency’s broader crackdown on the digital assets sector.

“The SEC can pursue its claims only if the tokens and staking services it has identified are ‘securities,’ reads the motion. “They are not. The claims must therefore be dismissed.”

PYMNTS has reached out to the SEC for the comment and the agency declined to comment.

The SEC sued Coinbase in early June as part of a wider cryptocurrency crackdown that also included legal action against Binance, the largest crypto company in the world. The commission’s action accuses Coinbase of operating as an unregistered exchange, brokerage and clearinghouse.

“The SEC’s central legal claim is that Coinbase has pocketed billions of dollars by collecting transaction fees from investors without the legally required disclosures and protections of securities registration — exposing its customers to risk,” PYMNTS wrote recently.

Coinbase, meanwhile, has consistently maintained that the SEC has refused to offer it a clear way to register as a compliant trading platform.

“From the point of view of Coinbase, the SEC suit has a fatal flaw — none of the digital assets under discussion represent investment contracts, even if they may be the objects of those contracts,” PYMNTS wrote.

Coinbase’s chief legal officer said at an investor conference earlier this month that the company will also seek a legislative solution while it fends off the SEC suit.

“Even as we’re managing the litigation, we are equally eager to engage in pressing legislative solutions,” said Paul Grewal. “We think the court could and should rule that the case lacks legal merits and that will be the end of it.”

In another filing Wednesday, Coinbase maintained that it welcomed oversight of its industry and had worked with multiple regulators, even agreeing to some level of SEC authority in the digital asset space.

“But in the past year in particular the SEC has dramatically expanded its definition of investment contract and, therefore, its own authority to regulate digital assets,” the company said. “It has done so by decree, arbitrarily, and without congressional mandate.”