Coinbase reiterated that digital assets on its platform are not securities and that the same classification applies to its staking program.

Coinbase accused the U.S. Securities and Exchange Commission (SEC) of overstepping its authority in a court filing on Oct. 24.

The exchange argued that the SEC’s classification of crypto assets listed on its platform as securities falls outside its jurisdiction, and further accused the regulator of attempting to redefine the criteria for what constitutes a security, a departure from established norms and precedents.

Coinbase Chief Legal Officer Paul Grewal said in an Oct. 24 post on X (formerly Twitter) that the SEC’s actions reflect an attempt to maintain oversight of “security” and “contracts” without any limiting parameters.

Grewal added, “By deeming any purchase in which the buyer expects appreciation to increase in value to be an investment contract and therefore a security, the SEC is attempting to radically expand its own authority. As the material issues doctrine makes clear, only Congress can do that.”

Coinbase’s Argument

In its filing, Coinbase clarified that not all financial transactions with profit potential should be considered securities, and stressed that the SEC’s jurisdiction is limited to securities transactions.

“Investment contracts give the buyer a contractual claim on a business’s future earnings, profits or assets. That’s what makes them securities rather than just investments.”

The exchange further stated that its staking program does not qualify as a security because “the IT outsourcing services provided involve neither the investment of customer funds nor the management of Coinbase.”

It added:

“If the SEC’s position is accepted, countless software-driven services will become securities. This would be yet another radical expansion of the SEC’s power, without basis in precedent.”

Coinbase and the SEC have been locked in a protracted legal battle over cryptocurrency regulation over the last year. The regulator filed similar lawsuits against major cryptocurrency exchanges, including Binance, in June. #COINBASE  #SEC