In its argument to a federal judge, Wall Street’s top cop emphasized the need to disregard a summary judgment request in its complaint.
Concerning the cryptocurrencies’ case against Coinbase in a federal court, the Securities and Exchange Commission (SEC) claims they miss ‘inherent or innate value.’ This has triggered eye rolls from Coinbase as well as crypto watchers.
SEC Reiterates Application of Howey Test in Coinbase Case
The SEC responded to a motion to dismiss its complaint filed in the summer by petitioning the judge to renounce Coinbase’s view that the trading of cryptocurrencies does not amount to an investment contract between those involved. It defended its stance by reiterating its belief that federal securities regulations are made to be expounded flexibly via the legal principle referred to as the ‘Howey Test.’
According to the legal doctrine, the agency has always contended that investment regulation can arise as investment contracts. Nevertheless, it claims that most cryptocurrencies are different because, on their own, they lack ‘intrinsic or inborn value.’ On the other hand, the tokens highlighted in the lawsuit meet the Howey test.
In its filing, the Securities and Exchange Commission wrote that if crypto-assets exemplify some primary value, the digital token is utilized to access the value. However, on its own, the token lacks innate or inherent value. Instead, it is linked to its underlying value, and according to the case, the value is the investment contract.
Coinbase Chief Attorney Rebuffs SEC Argument by Invoking the Pokémon Cards Qualification as Security
Paul Grewal, Coinbase’s chief legal officer, rebuffed SEC’s assertions. According to him, their motion embraces the ‘more of the same old’ view. He wrote that based on the Securities and Exchange Commission’s arguments, everything, including Pokémon cards, Swift bracelets, and stamps, are part of securities. Based on Rep. Ritche Torre’s assertions last week, that is not the law and should not be.
He referred to Gary Gensler’s questioning by Rep. Ritchie Torres at a September House Financial Service Committee session.
Ripple Labs partially triumphed against the agency in July after being sued. Its chief legal officer, Stuart Alderoty, scorned its argument on Twitter. On Thursday, he wrote that the SEC’s brief in the Coinbase case contains so many issues that he failed to know where to start.
Tokens Lack Legal Support Unlike Fiat Currencies
He highlighted the SEC assertion, claiming that in the absence of support or citation, digital assets lack intrinsic or innate value. At the same time, other items, for instance, collectible baseball cards, have value.
Part of the June 6 charge against Coinbase involved the SEC listing numerous altcoins branded unlicensed securities, for instance, MATIC, Solana, and Cardano. The tokens’ developers have resisted the designation, and Coinbase has slammed the charges against it.
The matter concerning the value of cryptocurrencies has been discussed since the technology’s initial days. Unlike fiat currencies such as the United States dollar, tokens lack the legal support of a government entity, and those such as Bitcoin were made to exist differently from a central authority. Instead, the token’s value is often established by the supply and demand market forces.
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