Coinbase had filed a motion for dismissing the lawsuit that was filed against the crypto exchange regarding securities law violation by the US Securities and Exchange Commission (SEC).
The securities regulator has now responded to the said motion. On October 3rd, it filed an opposition motion that was 40 pages long.
In the said filing, the government agency requested that the Coinbase motion be denied in its entirety by the court.
The SEC had filed the lawsuit in question against the largest crypto exchange in the United States back in June this year.
It had alleged that the platform was offering securities illegally and providing clearing agency and brokerage services without registering itself with the SEC first.
At the end of August, Coinbase responded with a motion for dismissal of the lawsuit and argued that crypto tokens were not securities.
It also asserted that the regulatory agency did not have any authority to oversee matters related to the crypto sector.
A four-point argument was presented by the SEC in response for demonstrating that the initial complaint it submitted is sufficiently adequate.
In the court filing submitted on October 3rd, the SEC said that Coinbase was trying to blame the agency for its current predicament and crying foul.
It also refuted the arguments the exchange had presented about it ‘blessing’ the exchange’s conduct when it had gone public.
It also argued that the responses of the SEC boss Gary Gensler in a Congressional hearing are not applicable to the federal securities laws implementation by the court.
The regulatory body has also argued against the stance of Coinbase about its lack of authority, claiming that securities transactions that involve crypto assets fall under its purview.
The agency asserted that Coinbase should not have been surprised by the lawsuit because the exchange was aware that as per the Howey test, the crypto asset bought and sold on its platform is a security.
The Howey Test
The SEC clarified that an investment contract is not a requirement of the Howey Test and the ‘adaptable’ and ‘flexible’ nature applies to crypto assets.
The document referred to a number of relevant case laws and statutes to show how the Howey Test applies to crypto assets.
The Howey Test refers to a legal test used in the US for determining if a particular asset is categorized as a security or not.
In 1946, there was a US Supreme Court case between W.J. Howey Co and the SEC, which established the criteria for the Howey Test, thereby giving it its name.
The SEC further added that the Ethereum staking service that the exchange offers is also a security because it requires monetary investment for annual returns.
Paul Grewal, the Chief Legal Officer of Coinbase, took to X to publicly talk about the SEC court filing and said that it was just the same old arguments.
Grewal reiterated that the tokens offered on Coinbase are not securities, which has become evident from the decisions of the Court in the last few months.
This was likely a reference to the loss SEC suffered in its lawsuit against XRP’s securities case.