In a substantial development in the ongoing legal battle between Coinbase and the U.S. Securities and Exchange Commission (SEC), Paul Grewal, Coinbase’s Chief Legal Officer, announced on Twitter that the cryptocurrency exchange has responded to the SEC’s intent to take Coinbase’s defence to court. The letter argued against the SEC’s anticipated motion, stating that it lacks merit.
The lawyer revealed the platform’s response to the SEC’s motion via an official Tweet:
We have responded to the SEC’s statement of intent to move to strike Coinbase’s defenses rooted in the major questions doctrine, abuse of discretion, equitable estoppel, unclean hands, and laches. We look forward to addressing the Court tomorrow morning. pic.twitter.com/hNk5SoGyD1
— paulgrewal.eth (@iampaulgrewal) July 12, 2023
This announcement comes ahead of the first court meeting between Coinbase and the SEC, scheduled for Thursday, July 13. The SEC filed a lawsuit against Coinbase last month, accusing the company of operating as an unregistered securities exchange. Coinbase, however, has categorically denied these accusations and has chosen to contest them in court.
Coinbase has been actively seeking regulatory clarity on cryptocurrency matters and has been engaging with the SEC over the past few months. In response to the SEC’s Wells Notice earlier this year, Coinbase argued that the SEC was infringing on its due process rights and attempting to take action ahead of Congress.
In its initial response to the SEC, Coinbase made a crucial argument to differentiate its operations from what is traditionally considered a securities transaction. The company asserted:
Like all securities, an economic arrangement can qualify as an investment contract only if it involves an ongoing business enterprise whose management owes enforceable obligations to investors.
The company further elaborated on this point by drawing attention to its secondary market exchange. Coinbase argued that the transactions conducted over this platform do not involve enforceable obligations from any business enterprise. Instead, the value that purchasers receive from these transactions is inherent in the assets bought and traded rather than being tied to the performance or actions of the businesses that generated them. Therefore, according to Coinbase, these transactions should not be classified as securities transactions.
The SEC, however, remains unconvinced. The regulator responded to Coinbase’s arguments, stating that Coinbase was attempting to construct its own test for what constitutes an investment contract. The SEC believes that the lawsuit is justified and pointed to Coinbase’s public statements acknowledging the potential for legal action as evidence.
