Securities Regulators Reject Special Treatment for Cryptocurrencies in Coinbase Case
Digital assets should not be viewed as “in any way special,” nor should actions against Coinbase be viewed as “novel or exceptional,” argues an association of North American securities regulators.
In an October 10 filing with the US District Court for the Southern District of New York in support of the US Securities and Exchange Commission (SEC), the North American Securities Administrators Association (NASAA) argued that digital assets are not given There is no need for special treatment in the application of securities laws.
In June, the SEC sued Coinbase, accusing the publicly traded crypto exchange of violating federal securities laws. Coinbase hit back, arguing that the digital assets and services it provides do not qualify as securities and that the agency has gone too far.
However, NASAA General Counsel Vincente Martinez argued that the SEC’s position was neither “novel nor exceptional.”
“The SEC’s theory in this case is consistent with the agency’s longstanding public position […] It is also well within the bounds of applicable law.”
The agency argued that the SEC did not have express authorization from Congress before applying applicable law to digital assets.
Howey test sufficient
One of the cornerstones of the lawsuit is likely to arise from the judicial interpretation of the Howey test, which is used to determine what counts as an investment contract. Coinbase has argued that digital assets do not meet all the criteria of the test.
Martinez argued that the Howey test was designed to be flexible enough to cover all types of technological advances in securities markets, including securities sold and traded on blockchains – similar to arguments previously made by the SEC became.
“The court should reject Coinbase’s attempt to limit and misapply the established legal framework in order to avoid being subject to the same regulatory obligations as all other participants in the country’s securities markets,” Martinez said, adding:
“The Court should decline to treat digital assets as special.”
Crypto Impact Overstated
Martinez also criticized Coinbase’s reasoning, citing the “Major Questions Doctrine,” which states that Executive agencies such as the SEC require congressional approval when dealing with issues of major political or economic importance.
“Coinbase dubiously describes the ‘digital asset industry’ as ‘a significant part of the American economy,'” Martinez said.
However, Martinez said that digital assets cannot reasonably be considered a significant part of the American economy because there is no practical or far-reaching one There is an economic use case for the acquisition of the vast majority of digital assets for purposes other than speculative purposes.
“With very few exceptions, digital assets are not generally accepted to pay for goods or services, nor can they be used to meet obligations to the government such as fees or taxes,” he wrote.
“Digital assets do not make economic sense as an asset class,” he said, adding:
“Coinbase overstates both the size and importance of this ‘industry,’ particularly the part that securities regulators oversee.”
NASAA’s motion joined the SEC’s and asked the judge to reject Coinbase’s attempt to dismiss the SEC lawsuit.
NASAA consists of 68 members, including securities regulators from all 50 U.S. states as well as securities regulators in Canada, Mexico and several U.S. territories.
“NASA and its members have a significant interest in this case,” Martinez added.
