Coinbase Moves to Dismiss SEC Lawsuit

The crypto exchange argued that the securities regulator has violated due process and has changed its own view of its authority over digital assets.

Coinbase filed a response to the U.S. Securities and Exchange Commission’s (SEC) lawsuit on Thursday, arguing that the regulator’s claims go beyond existing law and should be dismissed.

Today @coinbase filed our answer and notice of intent to file a motion to dismiss the @SECGov case against us. You can read our response for yourself – our arguments speak for themselves. 1/2 https://t.co/Ld2ZEejhyM

— paulgrewal.eth (@iampaulgrewal) June 29, 2023

In the 177-page document, Coinbase refuted the SEC’s primary claim that it operating an unregistered securities exchange, saying none of the assets trading on its platform were securities.

Six of the 12 assets that the SEC alleged are securities in its lawsuit were already trading on Coinbase when the regulator approved the crypto firm’s registration statement at the time of its Direct Public Offering.

“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,” stated the filing.

“The only change is in the SEC’s position regarding its powers.”

The complaint drew reference to public statements made by Gensler in May 2021, when he testified before Congress saying that the SEC lacked statutory authority to regulate Coinbase and similar businesses. At the time, Gensler said that there was no market regulator around crypto exchanges which did not have a regulatory framework.

Coinbase went on to state that even if the SEC does have regulatory purview over digital assets, the enforcement action should be dismissed on the independent grounds that it violates the exchange’s due process rights and “constitutes an extraordinary abuse of process.”

Coinbase asked that the court dismiss the SEC’s complaint and grant judgement in favor of all claims.

“In other words, they ask the court to say ‘you win on the merits, Coinbase.’ This is rare, and IMO a bigger news story than the answer and forthcoming motion to dismiss,” wrote Bill Hughes, senior counsel and director of global regulatory matter at ConsenSys, on Twitter.