The North American Association of Securities Regulators has asserted that digital assets should not be treated as something distinct and that the actions taken against Coinbase should not be considered novel or extraordinary. In an October 10 filing supporting the U.S. Securities and Exchange Commission (SEC) in the U.S. District Court for the Southern District of New York, the North American Securities Administrators Association (NASAA) stated that digital assets should not receive special treatment when it comes to applicable securities laws.
In June, the SEC filed a lawsuit against Coinbase, accusing the publicly traded cryptocurrency exchange of violating federal securities laws. Coinbase responded by contending that the digital assets and services it offers do not qualify as securities and that the agency's actions were excessive.
However, NASAA's general counsel, Vincente Martinez, believes that the SEC's position is neither novel nor exceptional. He stated that the SEC's theory in this case is consistent with the agency's long-standing public position and well within the bounds of established law.
The agency maintains that the SEC does not require explicit authorization from Congress to apply established laws to digital assets. A pivotal point of the lawsuit is expected to hinge on the judge's interpretation of the Howey test, which determines what qualifies as an investment contract. Coinbase argues that digital assets do not meet all aspects of this test.
Martinez argued that the Howey test was designed to be adaptable enough to cover various technological advances in securities markets, including securities sold and traded on blockchains, similar to arguments the SEC has made before. He stated that the court should reject Coinbase's attempts to narrow and misapply the established legal framework to avoid regulatory obligations.
Martinez also criticized Coinbase for invoking the "significant issues doctrine," which asserts that administrative agencies like the SEC need congressional approval for issues of significant political or economic significance. He contended that digital assets cannot reasonably be seen as a significant part of the U.S. economy because most have no real economic use case or widespread adoption beyond speculation.
NASAA's opinion aligns with the SEC's request for the judge to dismiss Coinbase's attempt to reject the SEC lawsuit. NASAA consists of 68 members, including securities regulators from all 50 U.S. states, as well as those in Canada, Mexico, and several U.S. territories, and believes it has a significant interest in the case.
