Coinbase, an American crypto trading company, is trying to dismiss the lawsuit found by the U.S. Securities and Exchange Commission.
In June 2022, the SEC sued the cryptocurrency exchange platform; claiming that Coinbase violated securities laws. The anti-market manipulation agency argued that the crypto trading firm did this by operating an unregistered broker, exchange, and clearing platform.
On Wednesday, Jan. 17, a lawsuit hearing was conducted in a New York federal court. The hearing lasted for almost five hours, allowing SEC and Coinbase to share their arguments.
In its defense, the American crypto trading company said that buying cryptocurrencies is just like purchasing Beanie Bunnies.
Coinbase Claims Crypto Buying is Like Purchasing Beanie Babies
Coinbase claimed that purchasing digital coins on an exchange platform is kist like collecting Beanie Babies; stuffed toys with plastic pellets inside.
William Savitt, Coinbase's lawyer, explained to U.S. District Judge Katherine Polk Failla that trading cryptos should not be subject to SEC jurisdiction since traders/buyers don't gain rights as part of their purchases.
He added that token trading is very different from trading bonds and stocks. Savitt further stated that his argument is like the difference between purchasing Beanie Babies stuffed toys and buying shares of Beanie Babies Inc., as reported by Yahoo Finance.
As of writing, the plan of the SEC to put cryptocurrencies and other digital assets under its jurisdiction is a complicated topic since the question of whether cryptos are securities has divided courts.
This is noticeable in the recent cases involving Ripple Labs XRP and Terraform Labs Pte. In the case of Ripple Labs XRP, the Manhattan federal judge ruled that the token should not be subjected to SEC jurisdiction.
However, Terraform Labs Pte. experienced the opposite after regulators involved in its case concluded that the blockchain payment platform was subject to the SEC's jurisdiction.
What SEC Argues Against Coinbase
According to Coin Telegraph's latest report, the SEC claims that Coinbase is trying to create a different version of the Howey Test; the U.S. Supreme Court case that determines if transaction should be considered as an investment contract.
The American watchdog said that Coinbase is doing this while allowing crypto trades to happen, offering holders access to ecosystems that it claims to be a common enterprise.
The SEC further stated that this leads to differing interpretations regarding the status of certain digital coins. It added that the discrepancy over the cryptocurrencies regarding the Howey Test is sufficient grounds to allow the lawsuit to proceed.
