SEC at a loss for words over Coinbase legal strategy
Coinbase recently made its defense strategy public at the same time they filed it. SEC seems to be caught off guard due to Coinbase lawyers not sitting on their hands and filing the papers before the deadline they had.
Coinbase defense
Before the SEC filed suit against Coinbase they had filed briefs with two other crypto-related lawsuits. Presumably, they have seen the writing on the wall with how the SEC treated them and the other crypto companies. These are what are called "amicus briefs". These are filed to help the case in question and start the legal ball rolling in the question the amicus brief pertains to.
The main argument these briefs contain is the claim that the SEC simply lacks authority to police the space because many digital assets are not securities. Their argument is that the SEC has not properly applied the test to determine if something is a security or not. The test in question is most likely the Howey Test. Coinbase argued the digital assets on its platform do not pass that test, in part because they lack contractual agreements.
A second point made by Coinbase is the fact that the SEC lacks basic guidelines, and because of that companies are unable to get what is called "fair notice" before they sue people. And this they argue violates their right to due process under the US constitution. This argument has the SEC however been dismissive of, and argued their counterpoint that the companies are very well aware of what is a security or not, and they are simply making a calculated business decision in not filing with the sec.
SEC is at a loss for words
Due to the fact that Coinbase lawyers filed their paper "early", it affected the time the SEC have to make a reply. And this whole thing appears to have caught them off guard. This is despite the fact that they, as I see it, should have been able to prepare for this way in advance. Thanks to the amicus briefs Coinbase has filed in other cases more or less making the same arguments.
The SEC has filed their response before July 3ed but has asked the court for an extension. This was granted and they now have until the 13th of July to file their response. And it will be very interesting to see what they come up with. And if they are unable to make a solid counterargument then we might even see Binance making the same arguments as part of their defense. They however are facing numerous other charges that Coinbase is not. So it would only help them partially.
Personally, I am eagerly waiting to hear the SEC's response to this. And it will be interesting to see them fighting with someone that actually fights back. It will also be interesting to see if the Ripple case will impact these cases at all, as that presumably will come to an end before both the Coinbase- and Binance suit. But what is your thought on this defense, think it has any merit to it?
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I think the fact that the SEC were caught off guard signals to us that there's some merit to it. They definitely should have since this coming but I guess they underestimated their opponent. It could be a good precedent for future lawsuits of this kind. Will be really interesting to know what the SEC's response will be on July 13.
Indeed. I think it speaks to the SEC thinking they win everything automatically, and everyone will just cave and fold thanks to the mighty SEC. Classic bully strategy.
This time isn't not working for them. Crypto is different and there are more parties interested in it than they can handle. I don't think any other strategy will work either.
Exactly, as soon as someone stands up to the bully they auto deflates.
The SEC has more resources and this battle can take years! Hopefully, they will be able to do a settlement.
Sure it can take some time, but the Ripplecase I think is a good measuring stick as I assume it is similar in some ways.
Not sure they are looking for a settlement, as I think all of those would be bad for them. And not to mention it would set a bad precedent going forwards, nullifying their strategy.
But you never know with these things =)
Coinbase is right, though - it's crazy to count crypto as a security when you're using it as money. The government just doesn't want to let go of it's control over money as such. Not everyone buys crypto with cash and then holds it to watch it go up and then make a profit like you would a stock. I've never bought crypto with cash - I've only cashed out some of my EARNINGS from this site and bought groceries or whatever with it - like you do with dollars.
Yes it is very strange that some crypto is considered security. But to be fair, the absolute vast majority of cryptos fit the bill of securities. Well, at least if you use the classic definition. But if what Coinbase is arguing will be believed by the court. It is very likely we will get new crypto-specific regulations. Sadly tho it will most likely mean that all crypto that they claim is security will still be, only the new rules will make it easier for companies to know if they are or not.