Coinbase Seeks to Toss SEC Suit, Citing Ripple Crypto Ruling (1)

Coinbase Global Inc. asked a judge to dismiss a Securities and Exchange Commission lawsuit against it, pointing to a recent decision by another judge who ruled that Ripple Labs’ XRP was not a security when sold on exchanges.

Coinbase, the largest US crypto exchange, filed its motion to dismiss Friday in federal court in Manhattan, arguing the SEC has no authority over its activities.

“The SEC has violated due process, abused its discretion, and abandoned its own earlier interpretations of the securities laws,” Coinbase said.

The SEC sued Coinbase in June, alleged the nation’s largest crypto currency exchange was illegally operating an unregistered securities exchange, broker and clearing agency.

Read More: Crypto Surges and Sinks on the Words of Two New York Judges

US District Judge Analisa Torres’s July 13 ruling in the Ripple case drew a distinction between institutional sales of XRP, which she said fell under securities regulations, and public sales, which she said did not. The crypto industry hailed the decision as a victory, and most coins soared on the news.

But a different Manhattan federal judge on Monday sharply disagreed with the decision in the Ripple case, ruling that the SEC could go forward with claims against Terraform Labs Pte and founder Do Kwon, including claims related to sales made on exchanges.

Both judges applied a 1946 Supreme Court ruling to determine whether particular crytpo assets constitute securities that can be regulated by the SEC. Neither the Ripple case nor the Terraform case is controlling precedent in the Coinbase suit.

The case is Securities and Exchange Commission v. Coinbase Inc., 23-cv-04738, US District Court, Southern District of New York (Manhattan).

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To contact the reporters on this story:
Bob Van Voris in federal court in Manhattan at rvanvoris@bloomberg.net;
Yueqi Yang in New York at yyang492@bloomberg.net

To contact the editors responsible for this story:
Misyrlena Egkolfopoulou at megkolfopoul@bloomberg.net

Anthony Lin

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