The SEC has once again successfully received criticism and is leading a hot topic with its recent argument in the SEC vs. Coinbase lawsuit. Part of his argument is that cryptocurrencies have “no innate or inherent value.”
SEC Response to Coinbase Pre-Trial Judgment
The SEC asked the Court to reject Coinbase’s argument that cryptocurrency trading does not constitute an investment contract between the parties in response to Coinbase’s request to pre-trial judgment. He reiterated his assertion that federal securities laws are meant to be interpreted broadly under the “Howey test,” a legal principle, to support his argument.
The SEC maintained under Howey For decades, various investments, including chinchilla farms and whiskey coffins, can be governed as investment contracts. Although the tokens identified in his case meet Howey’s requirements, he claims that many cryptocurrencies only differ from each other because they “have no innate or inherent value” in themselves.
The SEC in its recent motion dated 03/10/2023, specifies –
“Crypto assets are not like the tangible assets sold in these cases. If crypto assets embody underlying value (such as an entry in a ledger), that value is accessible through the digital token. But the token (which is just software) has no innate or inherent value in itself: it is linked to its underlying value, which for the crypto assets at issue in this case, is the contract of investment. Without access to a service or the intellectual property that these crypto assets represent, they would have no value. After all, investors don’t buy these assets to own a numerical sequence of letters and numbers.
Coinbase CLO Response to SEC Request
Coinbase General Counsel Paul Grewal took to X to express his dismay at how the SEC continues to argue the same old point. In a thread of 7 posts, he further explains why the SEC’s arguments are “more of the same old, same old.”
Paul Grewal states that the SEC makes the same assertions about what the law is or should be without any legal citations. This can be seen in the recent motions pages 8.17-18 and 21.
He further mocks the SEC’s arguments, asserting that under its justifications for what is or is not a “security” (i.e., an investment contract), “everything from Pokémon cards to stamps to Swiftie bracelets, is also titles”.