- Cryptos aren't securities because they aren’t investment contracts
- SEC's assertions are not due to new information or a product of changes to Coinbase's business
In its first official response to SEC’s lawsuit, US crypto exchange Coinbase claimed the digital assets on the platform are not in the scope of the Commission's jurisdiction.
In the lawsuit, the SEC alleged that some of the cryptocurrencies available on Coinbase’s platform or through its wallet were unregistered securities. Early Thursday, Coinbase responded that they weren’t securities because they weren’t investment contracts.
No sale of a contract-tied asset
Coinbase claimed that the cryptos on its secondary market platform did not involve a promoter selling an asset tied to a contract. Token issuers have no obligations to investors.
The filing states that the value buyers receive through transactions on the platform is in the things traded and purchased rather than the businesses that generated them, which makes them non-securities transactions.
The about-face
Coinbase reminded that the SEC declared their registration statement effective back in April 2021, a process that “followed years of discussions and extensive review and comment on Coinbase’s statement.” The filing further states:
he SEC, fulfilling its mandate to consider “the public interest and the protection of investors,” 15 U.S.C. § 77h(a); 17 C.F.R. § 230.461(b), permitted Coinbase’s public offering without once suggesting that Coinbase must register its operations. Two years on, the SEC brings this action accusing Coinbase of having failed since 2019 to do just that: register as a national securities exchange, broker, and clearing agency. The Commission grounds its suit in allegations that 12 of the more than 240 tokens traded on Coinbase’s spot exchange are “securities.” Six of these 12 assets were already on Coinbase when the SEC declared the Company’s registration statement effective. The SEC called none of them securities in 2021.
The exchange claims these new assertions are neither due to new information nor a product of any material changes to its business in the last two years. The SEC’s complaint does not allege the company hid anything in the many years of collaboration before it was publicly listed.
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