Coinbase Vs. SEC: SEC’s Lawsuit Against Coinbase Gains Support from Securities Regulators

The post Coinbase Vs. SEC: SEC’s Lawsuit Against Coinbase Gains Support from Securities Regulators appeared first on Coinpedia Fintech News

In a lawsuit involving the U.S. SEC and Coinbase, an association made up of securities regulators claimed that a New York district court shouldn’t treat digital assets “as somehow special.” 

In an amicus brief submitted on Tuesday, the North American Securities Administrators Association argued in favor of the Securities and Exchange Commission’s legal action against Coinbase. The SEC accused the cryptocurrency exchange of operating as an unlicensed exchange, broker, and clearing agency in June. 

The State securities regulators argued that it would be fair if the respected Court would reject Coinbase’s attempt to interpret the law narrowly and improperly to avoid having to comply with the exact regulatory requirements as other participants in the nation’s securities markets. Additionally, the prosecution argues that the Court should reject any attempt to give digital assets a special status. 

The regulators voice that the SEC’s case against Coinbase is not “extraordinary,” citing the Howey Test, a 1946 case concerning citrus orchards that the U.S. Supreme Court used to decide whether transactions constitute investment contracts and hence subject to securities laws. Some people in the cryptocurrency business disagreed with how the SEC applied that court case. 

The SEC’s assertion that specific digital assets qualify as investment contracts for the test is “well within the bounds of established law,” according to NASAA.  

NASAA Discriminates Crypto Regulations

In its brief, NASAA stated that the SEC is simply upholding the law and not adopting new policies about digital assets. 

The organization stated, “It cannot be the law that an agency needs specific Congressional authorization to apply existing legislation to new fact patterns in complex and changing financial markets.”

Lawmakers have proposed several measures to regulate cryptocurrency, but none have yet been passed. Two bills—

1. one that would govern stablecoins, and
2. the other would take a comprehensive approach to developing a regulatory framework for cryptocurrencies—

passed through a House committee over the summer and are now awaiting a challenging Senate vote and a full House vote. 

Congress has not yet passed legislation establishing a thorough regulatory framework for digital assets, although it may do so in the future. Additionally, Congress can decide not to, the group noted. 

Also Read: SEC Claims Cryptocurrencies Have No Intrinsic Value, Coinbase Disagrees

Major Questions Put Forward

Additionally, NASAA disputed claims that the concept of the major question may be applied to cryptography. 

According to the idea, an agency needs explicit congressional authorization before deciding on a matter of significant national importance. 

The critical questions doctrine is divided into two parts: whether the issue will significantly affect the public or the country’s economy and whether a federal agency has the legal right to enact new rules. 

According to NASAA, incidents involving the theory of the major questions cannot be legitimately compared to the crypto sector regarding economic and political relevance. 

Since most digital assets have no real economic use case other than speculation, NASAA wrote, “As a first matter, digital assets cannot reasonably be considered a sufficiently significant component of the American economy.” 

To safeguard investors from fraud and abuse, NASAA represents state and provincial securities authorities in the United States, Canada, and Mexico. Over the past year, a few state securities regulators have also brought legal cases against Coinbase, Nexo Capital, and other businesses.