Coinbase Files Motion To Dismiss Recent SEC Lawsuit

The lawsuit accuses Coinbase of facilitating unregistered trading in 12 digital tokens that are considered securities. Coinbase strongly disputes these claims and argues that the SEC is applying securities laws in a manner that deviates significantly from established legal frameworks.

Coinbase Chief Legal Officer, Paul Grewal, stated that these allegations go beyond any existing law and should be dismissed. In a legal filing submitted to the U.S. District Court for the Southern District of New York, Coinbase expressed concerns about how the SEC interprets securities laws, suggesting that the agency is overstepping its legal authority.

By filing a motion to dismiss, Coinbase demonstrates its determination to challenge the lawsuit. This type of motion asserts that even if the allegations in the lawsuit are true, there is no valid legal claim against the defendant.
Coinbase maintains that the assets in question are not securities.

As a government agency, the SEC requires platforms that facilitate trading of securities to register with it. The SEC defines securities to include investment contracts, which the Supreme Court has interpreted through the Howey Test.

However, according to the filing made by Coinbase, the identified digital assets are not securities, and therefore, secondary transactions involving these assets are also not securities.

Coinbase additionally highlighted various inconsistencies made by the SEC, noting that the agency did not previously raise objections to 6 of the tokens mentioned in their dealings with Coinbase in 2021.

The lawyers further argued that the SEC had approved the registration statement put forth by Coinbase, allowing the company to sell its shares to investors during its initial public offering. This approval followed a thorough review process and discussions with the exchange, enabling Coinbase to trade over 240 tokens on its platform, including 6 of the disputed tokens.