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The North American Securities Administrators Association (NASAA) has filed a document supporting the United States Securities and Exchange Commission (SEC) in its lawsuit against Coinbase.
The document was submitted to the United States District Court for the Southern District of New York. It notes that digital assets should not be regarded as somehow “special” and should be subject to existing securities laws, like other securities and related assets.
TradFi grey hairs file Amicus Curiae on behalf *drum roll* 🥁 the SEC, in SEC vs. Coinbasehttps://t.co/ukeHcfcX8B
NASAA landing page screenshot and story attached. PROTECT. pic.twitter.com/DczmmRVlm5
— Mikko Ohtamaa (@moo9000) October 10, 2023
Back in June, the SEC took the first step in legal action against Coinbase. The Commission alleged the crypto exchange of violating federal securities regulations. In response, Coinbase argued that the services and digital assets it provided should not be classified as securities – noting that the SEC had overstepped its regulatory boundaries with the accusation.
NASAA’s general counsel criticised Coinbase and the crypto industry
According to NASAA’s general counsel Vincente Martinez, though, the SEC’s position is standard and within the established law boundaries, not a “novel” case:
“The SEC’s theory in this case is consistent with the agency’s longstanding public position… It is also well within the bounds of established law.”
One of the key aspects of the lawsuit will be the results and interprestation of the Howey test. This legal test use used to control what an investment contract is considered and whether the asset is a security. According to Coinbase, digital assets do not meet all the criteria of the test and as a result, cryptocurrencies should not be considered securities.
According to Martinez:
“The Court should reject Coinbase’s attempt to narrow and misapply the established legal framework to avoid the same regulatory obligations as other participants in the nation’s securities markets.”
He continued to criticise Coinbase for casting the cryptocurrency industry as a major component in the American economy. With “very few exceptions”, he believes that digital assets cannot be used to satisfy obligations to the government such as fees or taxes.