Coinbase, a prominent cryptocurrency exchange, has filed a motion in a New York federal court requesting the dismissal of the Securities and Exchange Commission’s (SEC) lawsuit against the company. The SEC filed the lawsuit in June 2023, accusing Coinbase of violating securities laws by operating as an unregistered exchange, broker, and clearing agency. The regulator also alleged that Coinbase had sold unregistered securities through its staking-as-a-service program, where users receive crypto rewards for participating in the proof-of-stake (PoS) process.
In response, Coinbase asserted that it does not trade securities and, therefore, the SEC lacks jurisdiction over its operations, rendering the accusations against the company irrelevant. Coinbase’s chief legal officer, Paul Grewal, further criticized the SEC for disregarding its previous interpretations of securities laws and infringing upon due process.
The filing also referenced a separate SEC case involving Ripple Labs’ XRP token, where a judge ruled that XRP was not considered a security when sold on exchanges. However, recent disputes over the Ripple ruling, particularly in a case against Terraform Labs and its CEO, Do Kwon, have raised questions about its applicability to the Coinbase case.
Despite Coinbase’s arguments, the SEC has continued its legal pursuit against other major crypto brands, including Kraken, Binance (and its U.S. subsidiary), and Genesis. The agency has also turned its attention to crypto influencer Richard Heart and Tron founder Justin Sun, alleging their involvement in selling unregistered securities.
Although Coinbase and Binance have sought to dismiss their respective lawsuits, the SEC’s legal action against them remains ongoing. The outcome of these cases could have significant implications for the regulatory landscape surrounding cryptocurrencies and blockchain-based assets.