The SEC recently won a legal case against Terraform Labs, a cryptocurrency company. Terraform Labs attempted to dismiss the SEC’s lawsuit by invoking the “major questions doctrine.” This doctrine asserts that significant policy matters should be determined by Congress rather than administrative agencies like the SEC.
The Securities and Exchange Commission (SEC) maintained that its regulatory jurisdiction over crypto assets, which it categorizes as “investment contracts” under securities laws, is not bound by this doctrine. The court concurred with the SEC’s stance and rejected Terraform’s motion for dismissal.
This ruling could have implications for Coinbase. The crypto company is currently facing a lawsuit from the SEC. In response, Coinbase has also filed a motion to dismiss the SEC’s case, relying on the same major questions doctrine as its main defense.
Coinbase asserted that the SEC’s attempt to regulate the secondary market for crypto trading exceeded its jurisdiction and necessitated explicit authorization from Congress. Additionally, Coinbase contended that fair notice regarding the SEC’s regulatory position on crypto assets was not provided.
How Will The SEC Respond To Coinbase?
However, the SEC might leverage the Terraform ruling as a precedent to challenge Coinbase’s motion for dismissal. They may contend that the significant questions doctrine does not impede them from enforcing securities laws on cryptocurrency assets and assert that they have adequately communicated their interpretation of the law in advance.
The Securities and Exchange Commission (SEC) has previously relied on precedent-setting court decisions to bolster its stance in similar cases. A notable instance occurred last April when it referenced a ruling that upheld its jurisdiction over digital tokens issued by Kik Interactive, a prominent messaging app.
The SEC vs. Coinbase case’s outcome carries significant implications for the crypto industry. Coinbase, a major crypto platform, shapes crypto firms’ approach to SEC’s regulations due to its size. Being a popular buying/selling hub, it significantly impacts the industry. Its destiny sets a precedent for companies dealing with the SEC’s rules.
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