Securities Regulators Oppose Preferential Crypto Handling in Coinbase Case

In a recent filing with the United States District Court for the Southern District of New York, the North American Securities Administrators Association (NASAA) has emphasized that digital assets should not receive special treatment and the action taken against Coinbase should not be viewed as unusual. The NASAA, supporting the U.S. Securities and Exchange Commission (SEC), argued that existing securities laws should apply universally, without exemptions for digital assets.

The SEC had previously sued Coinbase, accusing the publicly traded cryptocurrency exchange of violating federal securities laws. In response, Coinbase contended that the digital assets and services it provided did not fall under the category of securities, and that the SEC was overstepping its bounds.

Vincente Martinez, NASAA’s general counsel, stated that the SEC’s stance in the case was not novel or extraordinary and aligned with the agency’s long-standing public position. He emphasized that the Howey test, a fundamental aspect of the lawsuit used to determine investment contracts, was designed to be flexible enough to encompass various technological advancements in the securities markets, including assets traded on blockchains.

Martinez highlighted that Coinbase’s attempt to narrow and misapply the established legal framework should be rejected, emphasizing that digital assets should not be treated as unique. He challenged Coinbase’s claim invoking the “major questions doctrine,” stating that digital assets, in most cases, lacked practical economic uses beyond speculation and thus did not constitute a significant component of the American economy.

NASAA, comprising 68 members including securities regulators from all U.S. states, Canada, Mexico, and several U.S. territories, joined the SEC in urging the judge to reject Coinbase’s attempt to dismiss the lawsuit. Martinez underscored the substantial interest NASAA and its members had in the case, reinforcing the need for equal application of securities laws across all asset classes.

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