Coinbase accuses the SEC of overstepping its powers

SEC has overstepped its remit on cryptocurrency matters in the Coinbase case, according to the exchange’s response to the regulator’s lawsuit.

According to Coinbase representatives, the assets named in the complaint are not investment contracts and, therefore, cannot be classified as securities.

Referring to the Howey test, the company explained that cryptocurrencies on the secondary exchange market are not part of any agreements under which the sale of a contract-linked asset is conducted. Moreover, the issuers of tokens have no obligations to investors.

“Because such obligations do not arise in Coinbase’s secondary-market transactions, and because the value that buyers of Coinbase receive from these transactions is linked to the bought and sold items, and not to the enterprises that created them, the transactions are not deals in securities,” the statement says.

The exchange again pointed to a shift in Chairman Gary Gensler’s stance on the regulator’s powers between his arrival in April 2021 and mid-2022.

“Even if the SEC were right that the assets and services it identifies fall within its regulatory purview, the action should be dismissed on independent grounds as it violates Coinbase’s rights to due process and constitutes an extreme abuse of process,” added Coinbase.

The company noted that for many years it has complied with regulatory requirements and has repeatedly requested direct guidance from the SEC on the enforcement of federal securities laws with respect to the digital asset industry.

In a separate document, Coinbase said that its rights to due process were violated and that the regulator may have violated the Major Questions Doctrine. The company asked to set a seven-week schedule for its motion, the regulator’s objections and its response.

Earlier on June 6, the SEC filed a civil lawsuit against Coinbase. The regulator accused the exchange of offering securities without registration in the form of a number of tokens.

The regulator’s attention also turned to the Coinbase Earn staking program.

The exchange refused to alter its business model amid the SEC’s lawsuit.