“SEC claim should be dismissed”
US crypto asset (virtual currency) exchange Coinbase submitted new court documents to the district court on the 29th in a lawsuit filed against the company by the US Securities and Exchange Commission (SEC). We are moving to dismiss the SEC motion.
Tokens, which the SEC considers to be securities, are not investment contracts, and the SEC is suing beyond its powers.
We welcome dialogue any time with any regulator, including the SEC, and believe new legislation and rulemaking is the right path forward. But the claims in this case go far beyond existing law – and should be dismissed. 2/2 https://t .co/3CID7vYURP
— paulgrewal.eth (@iampaulgrewal) June 29, 2023
Coinbase Chief Legal Officer Paul Grewal said:
We are always open to dialogue with any regulator, including the SEC, and believe new legislation and rulemaking is the right way forward.
However, the SEC’s allegations in this case go far beyond current law and should be dismissed.
Coinbase first lists the procedures when the SEC validates the filing for the listing of Coinbase shares in April 2021. This was after years of discussions with Coinbase and a months-long review process, he said.
Coinbase disclosed its business to the SEC, explaining the list of cryptocurrencies it handles, trading services, staking services, self-custody wallets, etc.
In the lawsuit, the SEC claims that 12 stocks listed on Coinbase are “securities.” However, 6 of these 12 stocks were already on Coinbase when the SEC made the registration statement effective.
At that time (2021), the SEC did not designate them as securities.
About “investment contract”
Additionally, Coinbase also discusses what an “investment contract” is. For example, investment contracts apply to business operations that benefit all investors, such as the sale and distribution of oranges.
Without these profit-generating contractual commitments and the legally enforceable obligations that management owes to investors, it is simply an “asset sale” and not an “investment contract.” Claimed not to.
The profit that a user receives through a transaction that is a “property sale” is inherent in what the user purchases (in this case, virtual currency), not in the business. In such cases, the sale transaction shall not be considered a securities transaction.
Prior to the recent over-regulation by the SEC, there was no precedent that construed “investment contracts” to apply to single asset sales.
It also argues that six of the tokens that the SEC considers to be securities are not securities because they have a utility that can be used to pay for services provided by each platform or transaction fees.
Coinbase said Sandbox (SAND), Filecoin (FIL), Cardano (ADA), Solana (SOL), Flow and Polygon (MATIC) tokens have these properties.
What is SEC
Established in 1934. Its purpose is to ensure fair trading and investor protection, and to prevent insider trading, corporate fraudulent accounting, and market manipulation. It also determines whether virtual currency falls under the category of securities. SEC stands for “Securities and Exchange Commission”, and in Japan the “Securities and Exchanges Surveillance Commission” plays a similar role.
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