The United States Securities and Exchange Commission (SEC) has turned down Coinbase’s request for a special appeal in the case where the cryptocurrency giant challenges existing regulations. The SEC states that Coinbase is attempting to redefine the legal matter under discussion in order to force certification, a move seen as unproductive by the agency.
The SEC’s response, submitted to the Southern District Court of New York on May 10, emphasizes that Coinbase is dissatisfied with the Howey test, which the agency employs to determine what qualifies as a security. The SEC points out that Coinbase structures its operations in a way that makes it burdensome to comply with existing securities laws. “Coinbase simply does not like the outcome. Having created the situation, Coinbase cannot now complain about the consequences.”
At the core of the dispute is Coinbase’s appeal on April 12, in which it argues that an investment contract cannot exist without an obligation after the sale. The SEC disagrees, stating that Coinbase’s stance on what constitutes a ‘controlling matter’ lacks clarity and coherence. According to the agency, over the course of 80 years, it has never been necessary for investment contracts to include “contractual commitments” after the sale.
The SEC also commented that Coinbase’s attempt to introduce a new legal test and its subsequent rejection by the court does not warrant an intermediate review. The agency emphasized, “However, Coinbase’s decision to do so and its desire to rewrite long-established legal precedent to suit its own political objectives and business needs does not provide a compelling reason to prematurely certify an appeal in this case.”
This legal battle comes after the SEC filed a lawsuit against Coinbase in June 2023, accusing the exchange of violating federal securities laws by listing 13 tokens that, according to the SEC, are considered securities. Coinbase, on the other hand, maintains that transactions conducted on its platform do not fall under SEC regulations, supporting the opposing viewpoint.
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