Coinbase accuses SEC of overstep in latest bid to dismiss suit
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Coinbase's rebuttal to the SEC's June lawsuit is: Not everything is a security.
State of play: The U.S.'s largest crypto exchange is battling the securities regulator over its application of the so-called Howey Test, used to determine whether or not something is a security. On Tuesday Coinbase filed its latest argument to dismiss the enforcement action against it.
What they're saying: "The SEC's authority is limited to securities transactions. Not every parting of capital with a hope of gain qualifies, and trades over Coinbase are only securities transactions if they involve 'investment contracts,'" the court filing reads.
Between the lines: Coinbase is also asserting the major questions doctrine, the gist of which says that courts shouldn't uphold creative actions or arguments by government agencies that lack clear congressional authority.
- That's the same argument conservative Supreme Court justices invoked to deny the Biden administration's student debt relief program.
Zoom in: Coinbase's argument nods at Rep. Ritchie Torres' Pokémon question during a House Financial Services Committee hearing with SEC chair Gary Gensler.
- "A token sale on Coinbase is no different from a trade of a baseball card or Pokemon card or a Beanie Baby or a painting or bitcoin or ether," Coinbase wrote Tuesday.
Another example: Let's say there's an artist selling paintings on Etsy, and she puts a note out about an upcoming gallery exhibit, Coinbase argued.
- Those who see the note might buy the paintings, thinking the coming exposure could boost the price.
- Per "the SEC's conception, each sale and resale of the paintings on Etsy would be a securities transaction."
Yes, but: They aren't.
Of note: Coinbase also says the SEC hasn't proven the tokens in question grant the holder a financial stake in a business.
- An investment contract doesn't always have to be a stock, but it has to do something more than exist as something to own, the company said.
Go deeper: How the largest U.S. crypto exchange is brawling with the SEC
