Merely a few weeks after the SEC sued the platform for facilitating unregistered trading with 12 tokens that the agency considers to be securities, Coinbase’s legal representatives have filed for a complete dismissal of the lawsuit, citing concerns regarding the legal authority of the regulator.
One of the principal arguments laid out by Coinbase’s legal team is that six of the twelve cryptocurrencies at the heart of the lawsuit had already been greenlit by the SEC back in 2021. At the time, the six cryptocurrencies in question had been confirmed to not be securities by the SEC, which reviewed 240 digital assets that were listed on the exchange shortly after.
Since the SEC had already confirmed that the tokens in question were not considered securities, Coinbase argued that the current lawsuit is merely the result of internal policy changes that were not communicated to the companies the watchdog wishes to regulate.
“The SEC’s about-face is not a product of material changes to Coinbase’s business since 2021; none are alleged. Nor is it due to new information. Nowhere in its Complaint does the SEC suggest that Coinbase hid anything in the many years of cooperative discussion that preceded it becoming a public company. Nor is the reversal a product of legislative change. […] The only change is in the SEC’s position regarding its powers.”
Not only are the charges brought against Coinbase possibly unfounded, but they are also outside of the scope of existing law and regulatory precedent, argued Coinbase representatives.
Coinbase’s leadership has repeatedly stressed that they are more than willing to entertain dialogue with regulatory bodies and stay well within the legal framework imposed upon them – so long as the given framework is clearly laid out.
In this case, however, Coinbase believes the tokens in question are outside of the SEC’s scope owing to them not being considered securities by the agency’s own admission. Even if the tokens were to come under the purview of the SEC, the current lawsuit represents a violation of Coinbase’s rights and an abuse of process.
“Even if the SEC were correct that the assets and services it identifies are within the scope of its existing regulatory authority, this [legal] action must be dismissed on independent grounds that it violates Coinbase’s due process rights and constitutes an extraordinary abuse of process.”
The request to dismiss charges is now pending with the judge, who will respond as he sees fit. Meanwhile, Coinbase’s stock seems to be slowly recovering following the initial shock that sent it plunging to the depths.