In a recent bid to challenge the U.S. Security and Exchange Commission (SEC), Coinbase, the leading U.S.-based digital asset exchange, contended in a court document that the regulator lacks the jurisdiction to initiate an enforcement action against it. The SEC and Coinbase sit at opposing ends of a potential long-drawn legal tussle, sparked by the SEC’s allegations that Coinbase listed unregistered securities on its exchange.
The assertions of the SEC were promptly refuted by Coinbase. Grounding its defense in the premise that the virtual currencies on its platform do not qualify as securities, Coinbase stated they didn’t meet the “investment contracts” definition under the Howey test. The digital asset exchange further asserted that its platform operates merely as a secondary market doing transactional asset sales, devoid of any retaining “obligation” towards investors.
Fundamentally, Coinbase emphasized that its repeated requests for regulatory guidance from the SEC over the period had met with unresponsive actions. An attempt to pressurize the SEC into providing directions through a mandamus reportedly met with numerous extension of time petitions from the regulator.
In the eyes of Coinbase, the SEC’s prolonged regulatory involvement violates the ‘major question’s’ doctrine. This implies that Congress should refrain from delegating significant economic decisions to regulatory agencies. An SEC Commissioner’s testimony seeking legislative guidance to regulate digital assets was also cited.
Indeed, the SEC’s involvement in the cryptocurrency sphere this year can be likened to a crusade against the industry with a series of enforcement actions against key representatives. The likes of Kraken opted for staking service termination and the settlement of a $30 million fee to the SEC to avert a legal battle. Meanwhile, Bittrex filed for bankruptcy three weeks after facing SEC complaints. Additionally, Binance and Coinbase too became the subjects of SEC’s legal actions for purported non–compliance to securities law.
However, Brian Armstrong, the CEO of Coinbase, regarded the situation optimistically, claiming it as an opportunity to seek regulatory clarity for the industry. Armstrong pointed out that his company had undergone SEC review before acquiring its public company status in 2021. He added, “The agency’s dissembling stands in stark contrast to the ready hammer of retroactive enforcement the Commission has meanwhile brought down this year in rapid succession on crypto exchanges.”
As covered here, the crux of the matter pivots around the nature of digital assets, the absence of comprehensive regulation, and the prospective power dynamics between regulatory bodies and crypto platforms.
Source: Cryptonews
