Coinbase Challenges SEC Lawsuit, Asserts Regulator's Lack of Police Power over Crypto

As per a Reuters report, Coinbase submitted a letter to the Manhattan federal court just before midnight on Wednesday, asserting that the Securities and Exchange Commission (SEC) lacks the authority to pursue civil claims against them. According to Coinbase, the assets traded on its platform are not classified as "investment contracts" and, therefore, should not be considered securities.

SEC Chair Gary Gensler has been striving to establish regulatory jurisdiction over the cryptocurrency industry, which he claims has eroded investor confidence in the U.S. capital markets.

Coinbase stated, "The SEC can only pursue its claims if the tokens and staking services it has identified are deemed 'securities,' which they are not." The SEC filed a lawsuit against Coinbase on June 6, alleging that the company had made billions of dollars as a middleman by trading at least 13 cryptocurrencies, such as Solana, Cardano, and Polygon, which should have been registered as securities.

Coinbase was also sued due to its "staking" program, where it combines crypto assets to support blockchain network activity and provides customers with "rewards" while taking commissions for itself.

In a separate 177-page filing, Coinbase denied the SEC's substantive claims and expressed its support for regulation. However, it argued that the regulator was overstepping its boundaries by attempting to fill the "regulatory gap" concerning crypto assets without the explicit authorization of Congress.

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Reuters