On Friday, Coinbase revealed its plan against the ongoing lawsuit with the United States Securities and Exchange Commission (SEC). Reportedly, the exchange is intending to file an order seeking dismissal of the lawsuit, wherein Coinbase’s chief legal officer (CLO) expects to win the battle.
In its second-quarter 2023 earnings report which was released on Thursday, Coinbase CLO Paul Grewal expressed confidence the exchange would win the court case brought by the regulator. Following this, Coinbase seeks to file a motion to dismiss the lawsuit invalidating SEC’s claims. Grewal said:
With respect to the litigation with the SEC, I want to be very clear. We do think we can win. We expect to win.
To this, Grewal said Coinbase will file a motion asking the court to dismiss the lawsuit. He explained that it will argue that Coinbase did not list securities on its platform and that the SEC has no regulatory authority over crypto exchanges.
Tomorrow […] We will be moving the court for an order dismissing the case in its entirety.
Grewal added that it never suggested to Coinbase there was a requirement to register when it declared Coinbase’s registration statement effective in April 2021. Reportedly, the CLO expects the brief laying out its arguments will be fully submitted and considered by the court at the end of October. He added:
Our goal across not just the litigation, but all of our efforts engaging with the SEC and engaging with the U.S. government as a whole is to achieve regulatory clarity.
Furthermore, Grewal explains that the primary focus of exchange is to push on regulatory clarity in the US considering the present scenario wherein their undeniable confusion regarding the laws and regulations for crypto assets. He states that “conflicting messages about what the law provides” makes clarity in regulation a priority.
To this, he pointed out the example of contradictory statements from the SEC chair Gary Gensler and Commodity Futures Trading Commission Chair Rostin Behnam on the legal status of Ethereum. While Behnam classified Ethereum as a commodity, Gensler refutes the classification of any crypto assets other than Bitcoin as a commodity.
After the Wells Notice from March, the exchange retaliated with a narrow legal action. Then the US Court of Appeals for the Third Circuit sent a notice to the SEC regarding the need for clear rules for trading digital assets. However, even after all this, the SEC remained adamant and disregarded the need for regulations. It also denied Coinbase’s request and said it had no right to request regulatory clarity and that securities rules already exist.
Targeting this denial of regulation by the SEC, Grewal stated that many of the laws currently applicable to the space “were written well before the internet even existed.” He added:
Regardless of any particular outcome on any motion or any court case, clarity itself is the goal. That’s how we define winning.
In the recent months, SEC has been on an enforcement spree with the lawsuits against Coinbase and Binance being two major incidents with the SEC alleging them of violating federal securities laws. Then, Coinbase sent its opening statement in which it rejected the base of allegations it build its case on. It also claimed that “the SEC has chosen” to pursue enforcement actions.
Responding to it, the SEC said it would oppose any motion for judgement Coinbase would file and asked the court to reject Coinbase’s arguments that the suit violated the major questions doctrine and other concerns. It also alleged that Coinbase intentionally violated laws.
Then, in the pre-motion hearing, the SEC argued that just because it approves an S-1 filing from a company, does not mean the firm is not operating, or will not operate in “violation of the law.”
To this, the presiding judge raised speculations over SEC’s statements and admitted that she was all confused due to the lack of clarity. Recently, the court has also established a timeline for both the parties to follow in the ongoing lawsuit.