Coinbase (NASDAQ:COIN), a leading cryptocurrency exchange, is preparing its motion to dismiss (MTD) order in response to allegations by the U.S. Securities and Exchange Commission (SEC) of violating securities laws regarding its trading platform and staking offerings. The company maintains that the assets traded on its platform are not securities and is invoking the Major Questions Doctrine, which limits regulatory bodies from managing industries without Congressional approval.
The cryptocurrency firm plans to use the Biden administration's 2023 request for Congress to scrutinize cryptocurrency regulation as evidence that crypto technology fits the Major Questions Doctrine criteria. This move suggests that the SEC lacks Congressional backing to regulate the industry.
Crypto attorney John Deaton expressed his support for Coinbase's motions via a tweet, indicating a high likelihood of success. He highlighted that Judge Katherine Polk Failla might rule that secondary sales on Coinbase's platform do not fall under the SEC's application of the Howey Test. This potential ruling aligns with Judge Analisa Torres' decision in Ripple's lawsuit against the SEC.
Deaton underscored that no court has considered a secondary exchange of assets as a securities transaction in 80 years. Despite this, he acknowledged that Coinbase might face challenges refuting the SEC's assertion that its staking products violated securities laws. A partial victory for Coinbase could potentially challenge SEC Chair Gary Gensler's opinion that nearly all cryptocurrencies are securities.
It is anticipated that Judge Failla will soon respond to Coinbase's MTD order. She may invite both parties for an in-person hearing before making her decision.
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