In a motion to dismiss the lawsuit brought by the U.S. Securities and Exchange Commission (SEC), Coinbase drew a comparison between the sale of crypto and the sale of a parcel of land, the value of which may fluctuate after the sale. Or a condo in a new development. Or an American Girl Doll, or a Beanie Baby, or a baseball card. Coinbase was fleshing out the argument that the nation’s top securities regulator — the SEC, chaired by Gary Gensler — lacks jurisdiction to sue the California-based company because the assets Coinbase deals in are not securities.
When you buy crypto from Coinbase, you are just buying crypto — not a stake in the company’s equity or a claim on its future earnings. As is the case for Barbie dolls, Beanie Babies, or even fine art, buyers may be hoping the asset appreciates in value, maybe especially from the later efforts or labor of Mattel or a Picasso to improve their reputation.
Coinbase’s argument generally falls in line with a recent court decision in the SEC’s case against Ripple Labs, which found that most secondary market sales do not represent investment contacts or a securities offering. Coinbase is merely creating opportunities for interested buyers to acquire crypto. The realities and distinctions of assets like bitcoin and XRP matter when compared to traditional securities like stocks or bonds.
In the end, you can’t honestly say Coinbase doesn’t believe in crypto. As former Supreme Court Justice William John Howey said, “It is an investment of money in a common enterprise with the expectation of profit from the efforts of others.” Coinbase is creating a common enterprise for crypto, and it’s reasonable to expect profit from the efforts of others.