NASAA Supports SEC in Legal Battle Against Coinbase, Rejecting Arguments on Fraud and Howey Test Interpretation

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NASAA Supports SEC in Legal Battle Against Coinbase, Rejecting Arguments on Fraud and Howey Test Interpretation

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The North American Securities Administrators Association (NASAA) has backed the U.S. Securities and Exchange Commission (SEC) in its legal proceedings against Coinbase. In a court filing on October 10th, NASAA argued that cryptocurrencies are not inherently fraudulent but have attracted fraudsters who exploit investors' fear and economic vulnerability. NASAA echoed the SEC's stance that Coinbase violated securities law, asserting that the agency's position aligns with its long-held views on the industry. As a result, NASAA urged the court to dismiss Coinbase's argument against the SEC's interpretation of securities. NASAA is a non-profit organization of regulators from the U.S., Canada, and Mexico. Additionally, NASAA criticized Coinbase's interpretation of the Howey Test, a benchmark used in the U.S. to determine investment contracts' classification as securities. Coinbase argued that formal contractual undertakings and direct sharing in profits with the issuer's business are necessary under the test. The SEC's case against Coinbase, accusing the company of violating federal securities law, was filed in June. Despite fierce resistance from Coinbase, notable stakeholders like Senator Cynthia Lummis and other U.S. lawmakers have expressed support for the exchange.