Coinbase has been in court since June, following the securities and exchange commission (SEC) allegations of security laws violation. The exchange has however challenged the SEC case, citing the Ripple win against the agency as a reason to dismiss its case.
Coinbase cited the case throughout a brief on Friday filed in the U.S. District Court for the Southern District of New York, saying that the SEC classifying “a simple asset sale as a security is an unprecedented stretch,” and that a judge’s recent decision with Ripple bolsters their argument.
The SEC lost in a three-year old court case in which it alleged that Ripple and its executives Brad Garlinghouse and Chris Larsen made millions from the sale of an unregistered security, XRP. The case came to a ruling last month in which the judge said XRP blind bid sales did not violate security laws, implying that XRP was not a security.
In its presentation, Coinbase argued that it also sold crypto assets in blind bid-ask process, and should not be charged for security law violations.
“In this case, by contrast, the SEC has charged Coinbase based solely on blind, bid-ask, spot exchange transactions—the very sort of transactions the Ripple court recently held as a matter of law were not investment contracts because the undisputed facts showed no relevant relationship between the parties to the sale,” Coinbase said in the brief.
The top global exchange also mentioned the major questions doctrine in its arguments. It said the major question doctrine which states that “if an agency wants to decide on an issue that has major national significance, it has to be supported by clear congressional authorization” also applies to its case.
“The major questions principle applies directly here,” Coinbase said on Friday. “The wholesale regulation of secondary markets for trading digital assets qualifies as ‘extraordinary,’ and the digital asset industry, worth around $1 trillion, is a ‘significant portion of the American economy.” it stated. “The SEC’s authority is clear as mud,” Coinbase added.
Other cases with the SEC
Coinbase has pleaded the court to dismiss the SEC case against it twice. The first time, it mentioned that the SEC scrutinized the exchange and approved it to go public in 2021, so it can not now accuse it of being an “illegal securities exchange.” It is now citing Ripple vs SEC case in its second plea, but it isn’t the only exchange filing for a dismissal.
Bittrex, another U.S. based crypto exchange that has shut down services in the U.S. has also filed for a dismissal of the SEC case against it. The lawyers in the case argued that the SEC cannot regulate crypto assets as securities with permission from congress.
Binance also recently took a stand, vowing to “vigorously defend against any allegations” leveled against it by the SEC.
SEC may lose
The SEC’s regulation by enforcement approach has been criticized, not just by members of the crypto community, but also by members of congress and of the judiciary. A judge once described the approach as “cumbersome”, showing his disapproval.
Some members of the U.S. congress have also accused the agency of driving away innovation from the U.S., and with the current efforts to draft regulation for the industry, crypto may win at last.