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New Allegations in Lawsuit Over Securities Issues
On the 7th, the US Securities and Exchange Commission (SEC) filed new documents in a lawsuit against the major US crypto asset (virtual currency) exchange Coinbase.
He has expressed skepticism about Coinbase’s claim that it was unaware of the dangers of its actions violating securities laws.
He also argued that the SEC’s approval of Coinbase’s initial public offering in 2021 does not mean that it recognizes all of Coinbase’s business practices. The SEC states:
Before going public, Coinbase itself relied on the Howie test to assess whether selling cryptocurrencies on its platform constitutes trading securities. Coinbase adopted this legal framework as the basis for its listing decision.
It also noted that Coinbase had advised cryptocurrency issuers not to make “problematic statements” such as those traditionally associated with securities.
It also alleges that Coinbase has repeatedly informed its shareholders that cryptocurrencies traded on its platform run the risk of being deemed securities by authorities. Such actions, he said, show that Coinbase was aware of the potential application of securities laws to its business.
What is Howie Test
A test that determines whether a particular transaction falls under one of the securities trading definitions of an “investment contract” in the United States. Derived from the SEC’s lawsuit against WJ Howey. Although this itself is not legally binding, the SEC has taken legal action against multiple ICOs (token sales) based on this test.
Cryptocurrency Glossary
Controversial Interpretation of the Howie Test
The SEC also disputed Coinbase’s interpretation of the Howie test.
Coinbase said in its earlier filing that an “investment contract,” which defines a security, is a contractual undertaking to generate a profit or a legally enforceable obligation that management owes to an investor. It argued that it does not apply if there is no
Profits received by users through virtual currency transactions that are “asset sales” are inherent in the virtual currency purchased by users and are not generated from “investment contracts”. In other words, such transactions are not securities transactions.
It also noted that prior to the SEC’s recent over-regulation, there was no case law that interpreted “investment contracts” as applying to single asset sales.
connection: “SEC’s lawsuit is an act of overreach” US Coinbase filed for dismissal of lawsuit
On the other hand, the SEC this time considers the purchase of a virtual currency on a secondary market, such as a virtual currency exchange platform, to be a securities transaction because the purchaser has the expectation that the purchaser will benefit from the development of the virtual currency business. argues.
Coinbase reaction
Coinbase Chief Legal Officer Paul Grewal commented on the SEC allegations, saying that they were just repeating the same allegations as before:
After Coinbase gave notice of it intent to move to throw out their case, we consented to a few extra days for the SEC to explain why it intends to oppose. They’ve now filed and, sadly, it’s more of the same. 1/ 6
— paulgrewal.eth (@iampaulgrewal) July 7, 2023
The SEC ignores Howie’s judgment’s requirement that an investment contract, first and foremost, have an enforceable right to the issuer of the security or the like. It takes more than simply investing money (in order to call it a security).
The SEC ignored its duty to give due consideration to the public interest and investor protection when allowing Coinbase to list (if it had not reviewed its business).
District Court Judge Polk Faira is expected to review the arguments and issue a ruling in the next few days.
The post SEC refutes “Coinbase was aware of the risk of securities law violations” appeared first on Our Bitcoin News.
English (US) ·