Lawyers representing Coinbase Global have requested a U.S. judge to dismiss a lawsuit filed by the Securities and Exchange Commission (SEC). In their motion to dismiss the suit, Coinbase argues that the SEC’s interpretation of securities laws is flawed. They claim that cryptocurrencies should be considered more like baseball cards than stocks.
The SEC lawsuit, filed on June 6, alleges that Coinbase is operating as an unregistered securities broker and exchange. However, Coinbase’s legal team argues that the SEC misinterprets the Howey Test, a legal framework used to determine whether an asset qualifies as a security. They state that the SEC’s assertion that a “scheme” without a contractual undertaking is sufficient is incorrect.
Furthermore, Coinbase’s lawyers argue that recent crypto cases do not support the SEC’s attempts to use the term “scheme” as an escape from statutory text. They believe that the SEC’s portrayal of a simple asset sale as a security is an unprecedented stretch.
To illustrate their point, Coinbase’s lawyers draw a comparison between cryptocurrencies and baseball cards. They explain that one can invest in a baseball card company through an instrument that imposes obligations on the company, making it a security. On the other hand, buying baseball cards on the open market as commodities does not make them securities, even if the company makes representations about plans to create a premier card trading platform.
The attorneys go on to differentiate crypto exchanges from the stock market, stating that cryptocurrency transactions are similar to the sale of assets like land, condos, American Girl Dolls, Beanie Babies, or baseball cards. They argue that the value of these assets may fluctuate after the sale, but that does not make them securities.
Coinbase’s argument aligns with the historical development of the market for digital assets and tokens. It highlights the fact that the first major exchange to sell bitcoin, Mt. Gox, was initially associated with Magic: The Gathering, a collectible card game.
In summary, Coinbase is seeking the dismissal of the SEC’s lawsuit, asserting that cryptocurrencies should be treated more like baseball cards than stocks. They argue that the SEC’s interpretation of securities laws is flawed and does not align with the historical development of the crypto market.
