Coinbase’s Chief Legal Officer Alleges Breach of Due Process by the SEC in Motion to Dismiss Lawsuit

Coinbase, a prominent cryptocurrency exchange based in the United States, is taking legal action to challenge a lawsuit brought against it by the Securities and Exchange Commission (SEC) in June.

On August 4, Coinbase’s legal team filed a motion for judgment with the U.S. District Court for the Southern District of New York, alleging that the SEC had violated due process, abused its discretion, and departed from its previous interpretations of securities laws. The company’s lawyers referred to the SEC v. Ripple case, where a judge ruled that XRP did not qualify as a security based on the commission’s established criteria.

The crux of Coinbase’s argument lies in disputing that the 12 tokens under scrutiny in the SEC case meet the definition of “investment contracts” according to the Howey test. Furthermore, Coinbase denied operating as an unregistered broker and asserted that the commission’s objections to its staking program are legally unfounded. Coinbase sought the court’s dismissal of the case, contending that the SEC’s enforcement actions were punitive and constituted an unwarranted extension of its authority granted by Congress.

The SEC filed the lawsuit against Coinbase on June 6, following a Wells notice served to the exchange three months prior. Throughout the legal proceedings, Coinbase has consistently refuted the SEC’s allegations, maintaining that its activities comply with securities laws. The exchange announced its intention to file a motion to dismiss during an earnings call on August 3.

In addition to the Coinbase case, the SEC is actively pursuing enforcement actions against other entities, including Binance and Hex founder Richard Heart. Notably, U.S. lawmakers have recently passed legislation through committees that could potentially restructure the commission’s authority over digital assets if signed into law. This ongoing regulatory landscape underscores the importance and impact of the outcome in the Coinbase-SEC legal dispute, which could have significant implications for the broader cryptocurrency industry in the United States.

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