Coinbase challenges SEC lawsuit, claiming it does not deal in securities

Coinbase has filed a motion to dismiss the lawsuit brought against it by the Securities and Exchange Commission (SEC).

The lawsuit accuses Coinbase of being an unregistered national securities exchange, broker and clearing agency. In response, Coinbase argues that the cryptocurrencies it services are not securities.

Paul Grewal, Coinbase's Chief Legal Officer, stated in a series of tweets that the company's core argument is based on the fact that they do not offer "investment contracts" as defined by legal precedent. Grewal claims that the SEC's lawsuit goes against decades of established Supreme Court and binding precedent, raising concerns about due process and the SEC's authority.

The SEC's lawsuit, filed in June, accuses Coinbase of unlawfully facilitating trading in cryptoasset securities and generating significant revenue from that activity. However, Coinbase is citing a recent ruling in a separate case involving Ripple Labs' XRP cryptocurrency. In that case, a judge ruled that XRP is not considered a security when traded on exchanges, although institutional sales are subject to securities regulation.

Despite this argument, legal experts note that the Ripple ruling may not directly impact Coinbase's case. While the outcome of the Coinbase-SEC legal battle remains uncertain, the case highlights the ongoing regulatory challenges and debates surrounding the classification of cryptocurrencies and their legal status.