Lawyers for Coinbase Global asked a U.S. judge Friday to dismiss a suit by the Securities and Exchange Commission. They brought the arguments to back up their request.
Coinbase lawyers ask judge to dismiss SEC lawsuit
The SEC lawsuit filed June 6, alleges the crypto exchange is an unregistered securities broker and exchange. In the motion to dismiss the suit, Coinbase says:
“The SEC misreads Howey in asserting that a ‘scheme’ without a contractual undertaking will suffice.”
“Recent crypto cases do not support the SEC’s efforts to use ‘scheme’ as an escape hatch from statutory text.”
“The SEC’s effort to portray a simple asset sale as a security is an unprecedented stretch.”
Then, the motion goes on to absolutely pulverize the SEC’s allegations with a simple analogy to baseball cards.
Why crypto is like baseball cards, not stocks
To clearly illustrate what they mean, Coinbase’s lawyers make the following devastating critique of the Gensler SEC’s view of cryptocurrencies:
“So for example: one can invest in a baseball or other trading card company, through an instrument that imposes obligations on the company, and that will be a security. Or one can buy baseball cards on the open market, hoping they appreciate in value, and one will have bought a commodity. That remains true even if the company makes representations about plans to create a premier card trading platform, to drive up the value of the cards it sells. Those representations can’t turn baseball cards into securities. Baseball cards are not ‘shares in the [baseball card] enterprise.’”
The attorneys for Coinbase continued later on in the motion to delineate crypto exchanges from the stock market:
“There is an asset sale. That’s it. It is akin to the sale of a parcel of land, the value of which may fluctuate after the sale. Or a condo in a new development. Or an American Girl Doll, or a Beanie Baby, or a baseball card.”
This is not a far-fetched case at all when the first major exchange to sell bitcoin was Mt. Gox (an acronym for Magic: The Gathering Exchange, yes, the collectible card game).
Coinbase’s argument here isn’t any shoe-horned in theorizing. It has a real basis in the historical development of the market for digital assets and tokens.