In the latest move, Coinbase is challenging the United States Securities and Exchange Commission (SEC), arguing that the SEC overstepped its authority by categorizing cryptocurrencies listed on Coinbase as securities. Coinbase contends that the SEC’s definition of securities is overly broad and does not align with U.S. securities laws.
The dispute is outlined in a filing made on October 24 in a New York District Court, where Coinbase criticized the SEC for applying a definition of securities that, according to the exchange, goes beyond the regulator’s proper jurisdiction. Coinbase asserts that not all capital transactions with a hope of gain qualify as securities transactions, and trades on its platform should only be considered securities transactions if they involve “investment contracts.” The filing argues that the transactions in question do not meet this criterion.
Coinbase further accuses the SEC of attempting a “radical expansion” of its authority and claims jurisdiction over almost all investment activities. According to Coinbase, such broad authority is reserved for Congress under the major questions doctrine.
This development follows the SEC’s response on October 3, where the regulator opposed Coinbase’s motion to dismiss and reiterated its stance that various cryptocurrencies listed on Coinbase meet the criteria of investment contracts under the Howey test.
The SEC initially sued Coinbase on June 6, alleging that the exchange violated U.S. securities laws by listing tokens it deemed securities without proper registration. In response, Coinbase filed a motion for judgment on June 29, asserting that the SEC was abusing its power and infringing on the due process rights of the exchange.
The case is overseen by Judge Katherine Polk Failla, who may decide to schedule oral arguments involving Coinbase and the SEC before issuing a judgment. The possible outcomes include dismissing the case, proceeding to trial, or referring the case to a jury.