Lawyers for the cryptocurrency exchange Coinbase have asked a New York judge to dismiss the SEC’s complaint, claiming that the SEC exceeded its jurisdiction in this case.
In June, the SEC charged Coinbase with failing to properly register as a securities exchange, broker, and clearing agency. However, Coinbase reacted on Tuesday, claiming that the SEC’s regulatory authority is limited to securities transactions.
“Investment contracts give the buyer a contractual claim on the future income, profits, or assets of a business.” That is what distinguishes them from mere investments,” Coinbase stated in a filing.
According to the SEC’s current position, an investment contract exists whenever someone expects their purchase to increase in value or if they invest money. According to Coinbase, this analysis would give the SEC control over a wide range of activities.
To evaluate whether certain transactions may be regulated under securities laws, the SEC employs the Howey Test, a legal standard established by a 1946 U.S. Supreme Court case involving citrus farms. Coinbase claims that the SEC’s definition of the Howey Test has gone well beyond its original meaning.
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