The US Securities and Exchange Commission (SEC) has asked a New York court to reject Coinbase’s motion to dismiss a lawsuit in which the SEC accused the crypto exchange of selling unregistered securities.
In its petition to the court, the SEC said that a crypto token has “no innate or inherent value of its own.” Responding to the filing, Elon Musk and the co-creator of Dogecoin have ridiculed the SEC’s claim.
In its original motion to dismiss the SEC’s lawsuit, Coinbase argues that the agency has failed to adequately demonstrate the existence of an investment contract needed to classify cryptocurrencies as securities.
Citing a detailed history of cases in which the SEC has tried and failed to establish its authority over various different asset classes, Coinbase argued that the SEC’s claim to dominion over cryptocurrency failed on similar grounds,
For instance, in the 1980s, the SEC filed lawsuits against companies that sold gold coins before mining the gold itself, asserting that their commitment to deliver coins in the future constituted an investment contract.
Back then, courts sided with the gold sellers on the basis that the coins were not the product of the sellers’ managerial efforts but rather of the market value of gold at the time of delivery.
Similarly, Coinbase has contended that the market determines the value of the cryptocurrencies it offers on its platform, thereby negating the SEC’s assertions regarding the existence of an investment contract between the buyer and seller.
In response , the SEC argued that “crypto assets are unlike the tangible assets sold in those cases.”
“If crypto assets embody some underlying value (like an entry on a ledger), that value is accessed through the digital token. But the token (which is just software) has no innate or inherent value of its own,” the SEC claimed.
The agency argued that these crypto assets would be worthless without access to a service or the intellectual property they represent.
Of course, Coinbase supporters largely dismissed the SEC’s argument that cryptocurrencies have “no innate or inherent value.”
For example, in a post on X, Billy Markus, who co-created Dogecoin in 2013 and uses the social media handle Shibetoshi Nakamoto, observed the hypocrisy between taxing capital gains made on crypto investments while simultaneously claiming they have no real value.
Chiming in, X owner Elon Musk remarked: “It’s real if you have to pay taxes, but otherwise not real?”