SEC Says Coinbase Aware It Violated U.S. Securities Laws

U.S. regulators believe that Coinbase is trying to ignore the Howey test, which is used to determine which assets are classified as securities.

The SEC responded to Coinbase’s recent filing, claiming that the exchange made a “considered decision” to act as an unregistered securities intermediary.

The company filed to have the SEC’s allegations dismissed back in June.

The agency launched a sweeping legal action against two of the biggest names in the cryptocurrency industry in early June, filing consecutive lawsuits against Binance (and its U.S. subsidiary) and Coinbase.

The latter responded quickly, filing a request to dismiss all charges within weeks of the lawsuit.

In it, the exchange argues that the SEC had approved its business model as early as 2021, when it allowed Coinbase to become a public company.

The company has repeatedly reiterated its attempts to engage in active regulatory dialogue with U.S. regulators, so far to no avail. It even asked the SEC for more clarity on cryptocurrency regulation, but the agency has yet to respond.

However, the SEC responded to Coinbase’s request to dismiss the allegations on Friday, July 7. “Coinbase’s own conduct belied its argument that it did not recognize that its actions risked violating the federal securities laws,” the filing reads.

The committee further alleges that, since listing on Nasdaq, the exchange has repeatedly warned its shareholders that “crypto assets traded on its platform may be considered securities and may therefore be conducted in violation of federal securities laws, including the Federal Securities Act. Securities Law"". It now points to the registration statement as evidence that the SEC has endorsed its actions. "

The document also notes that Coinbase decided to ignore “more than 75 years of Howey’s control laws,” and that Hade made two “flawed arguments” in his request to dismiss:

The SEC stated, “(1) The investment contract must be or include a formal common law contract. (2) Even if a crypto asset is considered an investment contract when the issuer first issues and sells it, the asset cannot On platforms like Coinbase, contracts exist when transactions are made between non-issuers, because secondary market transactions that do not involve their issuers are simply “asset sales. Both arguments are false. "