Coinbase asks court to dismiss SEC complaint
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The duel between Coinbase and a top U.S. financial regulator has officially kicked off, with the opening shots fired on both sides now.
Driving the news: The U.S.'s largest crypto exchange filed a motion late Wednesday night asking the court to dismiss the SEC's lawsuit levied against the company this month.
What they're saying: The "fundamental" problem with the complaint is that "the subject matter falls outside the SEC's authority," Coinbase's lawyer wrote in a pre-motion letter to Judge Katherine Failla.
- The foundation of the SEC's suit is the allegation that Coinbase dealt in coins and offered investment contracts through its staking program that would be considered securities.
- "Because as a matter of law none of them are [securities], the claims must be dismissed," Coinbase argues in the letter.
Zoom out: This is what Coinbase has been contending for a while now, aligning with what it said before in response to the regulator's March Wells notice.
- Now, it's filling out more details to support its argument.
Zoom in: The crypto exchange is pushing back on the SEC's analysis of what constitutes an investment contract, saying that "an economic arrangement can qualify as an investment contract only if it involves an ongoing business enterprise whose management owes enforceable obligations."
- Between the lines: It's not a security, because it was a stand-alone asset sale.
Meanwhile, "No statute enacted since April 2021 gives the SEC any powers to regulate digital asset exchanges, much less retroactively," the company's motion reads.
The big picture: While Coinbase's argument is specific to the complaint the SEC brought against it, its overarching point applies more broadly — the SEC can't enforce rules that don't exist...yet.
