There is a lawsuit ongoing between the US Securities and Exchange Commission (SEC) and the crypto exchange Coinbase.
In its latest argument in federal court, the regulator said that cryptocurrencies do not have any inherent or innate value, which prompted eye rolls from crypto watchers and Coinbase.
The SEC’s petition
Coinbase had filed a motion for getting the lawsuit, which had been filed over the summer, dismissed entirely.
This prompted the SEC to petition a judge to reject the stance of the crypto exchange, which had claimed that crypto trading is not categorized as an investment contract.
The agency repeated that the purpose of federal securities laws is to be flexibly interpreted via the legal doctrine called the ‘Howey Test’.
Under the said doctrine, the SEC has been arguing for decades that it is possible to regulate investments as investment contracts, whether they are in chinchilla farms or whiskey caskets.
But, according to the regulatory body, a lot of cryptocurrencies are different because they do not have any inherent value, while the tokens it had cited in the lawsuit fulfilled the criteria of the Howey Test.
The SEC stated in its filing that if there is any underlying value associated with a crypto asset, it is accessed via the digital token.
But, there is no innate or inherent value of the token itself, as it is connected to its underlying value, which makes it an investment contract.
Paul Grewal, the chief legal officer for Coinbase, brushed off the arguments put forward by the SEC and said that the agency’s motion was just the same old mantra again.
Grewal stated that the arguments the SEC had presented would imply that everything from Swiftie bracelets to stamps to Pokemon cards should be categorized as securities.
He said that last week, Republican Ritchie Torres, the New York Congressman, had made it clear that this was not the law and it should not be so.
This was a reference to the hearing of the House Financial Services Committee in the previous month where Gary Gensler, the SEC chairman, had been questioned by the Congressman.
The chief legal officer for Ripple Labs, Stuart Alderoty, also took to X to ridicule the argument put forward by the SEC.
Ripple Labs had won a partial victory against the regulatory agency in its own lawsuit back in July. Alderoty said that there were several things wrong with the SEC’s argument in its case against Coinbase.
He said that the SEC claimed that crypto tokens do not have any inherent or innate value, yet the same does not apply to collectible baseball cards.
The SEC had filed the lawsuit against Coinbase on June 6th and it had named a number of altcoins as securities, which included Solana, Cardano, and MATIC.
While the crypto exchange has rebuked the charges filed against it, those that have developed the said tokens also balked at the designation.
The question about the value of cryptocurrencies has been asked from the very beginning when the technology was first introduced.