The Securities and Exchange Commission (SEC) still treats cryptos as securities.
This week, the conflict between Coinbase and the U.S. Securities and Exchange Commission (SEC) is escalating as the SEC resists Coinbase’s efforts to dismiss a lawsuit alleging securities law violations. The SEC initially filed the lawsuit in June, accusing Coinbase of failing to register as a securities exchange. Coinbase responded by seeking a pre-trial ruling that crypto transactions are fundamentally different from investment contracts, challenging the SEC’s case. The SEC has now urged the court to reject Coinbase’s request for dismissal, pointing out “fatal flaws” in Coinbase’s arguments.
The key issue revolves around the Howey test, which determines if an asset qualifies as an investment contract subject to SEC regulation. Coinbase argues that crypto trades don’t fit this definition because they lack formal contracts, while the SEC contends that formal contracts aren’t necessary for an investment contract. Coinbase’s Chief Legal Officer, Paul Grewal, maintains that the assets on its platform aren’t securities and are outside the SEC’s jurisdiction. However, the SEC insists that allowing Coinbase to go public doesn’t imply automatic endorsement of compliance with securities laws (!!!). The conflict underscores the differing views on cryptocurrency regulation between Coinbase and the SEC.
