In a brief filed on Friday in the U.S. District Court for the Southern District of New York, crypto exchange Coinbase referenced the recent Ripple Labs case to argue for dismissing the SEC lawsuit against them. Coinbase contended that the SEC’s attempt to categorize a straightforward asset sale as a security is an unprecedented and far-reaching interpretation. They pointed to a recent ruling in the Ripple case, asserting that it bolsters their argument, media reports said.
The SEC and Ripple have been locked in a legal battle since 2020 when the agency accused Ripple of raising $1.3 billion through the sale of XRP, which the SEC claims is an unregistered security. Last month, a judge ruled that certain sales of XRP did not violate securities laws due to the presence of a blind bid process, where buyers were unaware that the sales were benefiting Ripple. However, the judge ruled that other direct sales of the token to institutional investors were indeed securities.
In their brief, Coinbase contended that the SEC had charged them solely based on blind, bid-ask, spot exchange transactions, similar to those transactions that the recent Ripple court case held as not qualifying as investment contracts. According to Coinbase, this was due to the absence of a relevant relationship between the parties involved in the sale.
Coinbase further cited the major questions doctrine, which has been raised in the crypto industry before, as applicable to their case against the SEC. This doctrine states that if an agency seeks to decide on an issue of major national significance, it must have clear congressional authorization to do so. Coinbase argued that the wholesale regulation of secondary markets for trading digital assets meets the criteria of the major questions doctrine, considering the digital asset industry’s worth of approximately $1 trillion, which constitutes a significant portion of the American economy.
Coinbase’s motion to dismiss the SEC lawsuit comes amidst ongoing legal debates and differing judicial opinions on various crypto-related cases, highlighting the complexities and uncertainties surrounding the regulatory landscape in the crypto industry.
