XRP Lawyer Backs Coinbase in SEC’s Investment Contract Dispute

Coinbase, one of the leading cryptocurrency exchanges, has fired back at the U.S. Securities and Exchange Commission (SEC) in an ongoing legal battle, challenging the SEC’s attempt to classify cryptocurrencies as securities. The exchange asserts in the latest filing that the SEC is overreaching its authority, a move that could have profound implications for the broader crypto industry.

Coinbase’s Legal Standoff with the SEC

In a legal response to the SEC, Coinbase is fighting to have the enforcement action against it dismissed. The exchange argues that the tokens it lists don’t necessarily meet the definition of an investment contract, which the SEC is seeking to impose.

Coinbase contends that the SEC’s approach represents an unauthorized expansion of its regulatory scope, and it’s an approach that many within the crypto industry had anticipated. The SEC initially sued Coinbase, along with Binance, earlier this year.

Meanwhile, the heart of Coinbase’s latest filing revolves around the definition of an investment contract. According to the SEC, an investment contract exists if someone invests capital with the expectation of future value appreciation. However, Coinbase argues that not all assets with investment potential are securities. It further suggests that a token should only be considered a security if it offers a contractual claim related to a business’s future profits or assets.

Notably, Coinbase’s legal filing also addresses the broader implications of the SEC’s stance, stating that numerous software-driven services could be classified as securities if the SEC’s position is accepted. Coinbase deems this a radical expansion of the SEC’s authority without precedent.

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Challenging Regulatory Overreach

The SEC has been facing increasing scrutiny and challenges in its attempts to regulate the evolving cryptocurrency legislative landscape. Coinbase’s filing questions whether the “major questions doctrine” should be applied to prevent the SEC from overextending its reach in crypto regulation.

Notably, Coinbase’s legal response asserts that the SEC raises substantial separation-of-powers concerns, especially when it takes enforcement actions without clear regulatory guidance.

Meanwhile, in a recent statement, Coinbase’s Chief Legal Officer, Paul Grewal, contested the SEC’s position on their motion for judgment. Grewal argued that the SEC is overreaching its authority by asserting control over all investments, irrespective of the traditional legal definitions of “security” and “contract.” In addition, he emphasized that the SEC’s interpretation contradicts established legal principles.

A decision on this case is expected in early 2024, and this legal battle isn’t the only one Coinbase is facing with the SEC. In April, Coinbase filed a lawsuit against the regulator, seeking clarity on cryptocurrency rules.

Deaton’s View On Coinbase Vs. SEC Lawsuit

Meanwhile, Coinbase’s legal battle with the SEC underscores the ongoing struggle to define the regulatory framework for cryptocurrencies. As the crypto industry continues to evolve, these legal clashes could have far-reaching consequences, impacting the future direction of cryptocurrency regulation.

John Deaton, a prominent XRP lawyer, has shared his thoughts on Coinbase’s recent legal filing. Deaton expressed his opinion that the SEC’s opposition to Coinbase’s Motion to Dismiss (MTD) lacked clear legal authority or precedent, making it one of the weakest legal briefs he has encountered.

From the beginning, Deaton has believed that Coinbase has a strong chance of success with their MTD. He suggests that Judge Failla might grant the motion, at least partially concerning asset sales, if not the entire case. Notably, the XRP lawyer’s odds for a Coinbase victory at different levels of the court system are notably optimistic – better than 50% at the District Court level, better than 60% at the 2nd Circuit level, and better than 80% at the Supreme Court level.

Meanwhile, Deaton also indicates that he sees Gary Gensler and the SEC’s efforts to expand the Howey test as unconstitutional and anticipates that their ability to do so is limited.

Talking about the Coinbase lawsuit, XRP advocate John E. Deaton has previously forecasted the potential for a mixed outcome in the legal battle between Coinbase and the SEC. Notably, Deaton believes that Coinbase may secure some victories but places the odds of a full win at just 5%.

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