In its first legal response to the U.S. Securities and Exchange Commission’s (SEC) lawsuit, crypto exchange Coinbase claimed that digital assets listed on its platform fall outside the SEC’s purview. The SEC had sued Coinbase at the beginning of June, alleging that a dozen of the cryptocurrencies offered through its wallet or trading platforms were unregistered securities. In its answer, Coinbase argued that these cryptos are not investment contracts and therefore are not securities.
Because no such obligations are carried in the transactions over Coinbase’s secondary market exchange, and because the value that Coinbase purchasers receive through these transactions inheres in the things bought and traded rather than in the businesses that generated them, the transactions are not securities transactions, the filing said.
Coinbase also alleged that its due process rights were violated when the SEC brought the lawsuit and that the SEC’s lawsuit may violate the major questions doctrine. The company asked the judge to let it file for judgement and set a 7-week schedule for its motion, the SEC’s opposition and its own response to the opposition.
Even were the SEC correct that the assets and services it identifies are within the scope of its existing regulatory authority, this action must be dismissed on the independent grounds that it violates Coinbase’s due process rights and constitutes an extraordinary abuse of process, the filing said.