SEC approves Coinbase legal action

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SEC approves Coinbase legal action

The North American Securities Administrators Association has received support from the U.S. Securities and Exchange Commission over its legal actions against Coinbase.

NASAA argued that nothing is inherently fraudulent about cryptocurrencies in a court filing in Oct. 10 that ruled that nothing is inherently fraudulent about cryptocurrencies. The sector has attracted fraudsters who prey on investors' fear of missing out and their economic hardships, making it a particularly attractive destination for fraudsters.

The SEC's argument that Coinbase violated securities law by its operations was consistent with the agency's longstanding position about the industry, NASAA said. The association urged the court to reject the exchange's argument against the SEC's interpretation of securities.

NASAA is a nonprofit association of state, province, and territorial securities regulators in the United States, Canada, and Mexico.

NASAA criticized coinbase's version of the Howey Test in terms of the emerging industry.

The Howey test, a legal benchmark used in the US, identifies a transaction as an investment contract and falls within the security category as per federal law.

To be classified as a security, a transaction must require an investment of funds within a collective endeavor, with the expectation of profit from the group's efforts.

Howey testing requires products to possess formal 'contractual undertakings' between the buyer and seller, per Coinbase. The exchange also argued that investors must share directly in the profits, income, or assets of the issuer's business.

The SEC filed its suit in June alleging that Coinbase violated federal securities law by its activities. However, the exchange has doubled down on its effort to dismiss the case and has received support from notable stakeholders like Senator Cynthia Lummis and other U.S. lawmakers.