In an Oct. 3 filing in New York District Court, the SEC responded to Coinbase’s claims by reiterating its position that certain cryptocurrencies listed on the trading platform constitute investment contracts under the Howey test and therefore must be registered with the SEC.
The regulator noted that Coinbase “always knew” that the cryptocurrencies it traded were securities under the Howey test, and the exchange allegedly already admitted this in its filings with the SEC. The agency disagreed with Coinbase’s assertion that the SEC has no authority over the cryptocurrency market until Congress declares it. As the Commission put it, it did not assume any new authority to do anything that would be prohibited by the federal securities laws.
“Each crypto asset issuer has provided hope to investors and buyers trading on Coinbase that their investments will increase significantly based on the issuer’s plan to develop and maintain the value of the asset,” the SEC said.
Coinbase chief lawyer Paul Grewal wrote on social network X (Twitter) that the SEC continues to make old arguments, and the cryptoassets that the regulator so persistently calls securities are not actually securities and are not even under the jurisdiction of the Commission. Grewal joked that even Pokemon cards, stamps and Swiftie bracelets could be SEC securities.
The SEC’s arguments today would mean that everything from Pokemon cards to stamps to Swiftie bracelets are also securities. As @repritchie made so clear last week, that is simply not the law, nor should it be. 4/7
— paulgrewal.eth (@iampaulgrewal) October 3, 2023
The SEC recently opposed the sale of assets of bankrupt crypto lender Celsius on the Coinbase exchange, explaining that the platform is not registered with the agency as a broker.
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