The U.S. Securities and Exchange Commission (SEC) has countered Coinbase's motion to dismiss the regulator's lawsuit. In a filing on October 3 in the New York District Court, the SEC pushed back against Coinbase's claims in its motion to dismiss and reiterated its belief that some of the cryptocurrencies listed on the platform are investment contracts under the Howey test, requiring SEC registration.
The SEC stated: "Each crypto-asset issuer invites investors — including purchasers on the Coinbase platform — who reasonably expect the value of their investment to increase based on the issuer’s widely communicated plan to develop and maintain the value of the asset." The SEC argued that Coinbase "knew all along" that the cryptocurrencies it sold were securities if they met the Howey test, and it alleged that Coinbase acknowledged this in its SEC filings.
Additionally, the SEC rejected Coinbase's arguments invoking the "material issues doctrine," which suggests that the SEC lacks authority over cryptocurrency markets unless explicitly granted by Congress.
Coinbase's Head of Legal, Paul Grewal, responded on Twitter, stating that the SEC's arguments were "more of the same old stuff" and asserting that the assets Coinbase listed "are not securities and do not fall under the SEC's jurisdiction." Grewal argued that the SEC's response implied that "everything from Pokemon cards to stamps to Swiftie bracelets are also securities." Miles Jennings, General Counsel at a16z crypto, argued in an op-ed that the SEC's motion had significant flaws. Jennings suggested that even if the court agreed with the SEC's primary argument about investment contracts, the case "still should fail" because he believed the SEC's definition of an investment contract had "unlimited breadth."
