Is Coinbase Disillusioned With Crypto?

If you go by a handful of headlines and chatter on Crypto Twitter, you might think that the largest publicly-traded crypto exchange Coinbase now thinks bitcoin is about as valuable as a Beanie Baby. And forsooth, good man, woman or human! It is a comparison the exchange drew, in a formal legal document no less.

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In a motion to dismiss the lawsuit brought by the U.S. Securities and Exchange Commission (SEC), Coinbase apparently “backpedaled” on a lifetime of saying crypto is the future of finance. The document was submitted on Aug. 4, 2023 but seemingly only recently has caught attention. To wit:

“On Coinbase’s secondary-market exchange and through Prime, there is no investment of money coupled with a promise of future delivery of anything. There is an asset sale. That’s it. It is akin to the sale of a parcel of land, the value of which may fluctuate after the sale. Or a condo in a new development. Or an American Girl Doll, or a Beanie Baby, or a baseball card.”

American Girl Doll? No doubt Coinbase missed the moment to capitalize on the Barbie buzz.

But, no, the exchange has not given up on crypto afterall. Instead the exchange was fleshing out the argument that the nation’s top securities regulator — the SEC, chaired by Gary Gensler — lacks jurisdiction to sue the California-based company because the assets Coinbase deals in are not securities.

In particular, in this case, the exchange is arguing about the legality of its secondary trading service called Prime. I’m not going to go through the history of securities law or how it should be applied to cryptocurrencies: I’m not a lawyer, and there’s plenty of more informed content to read on the matter, given that securities law is seemingly about the only thing discussed in crypto anymore.

But I will say Coinbase’s argument here, specifically about “transactions on Coinbase and through Prime,” generally falls in line with a recent court decision in the SEC’s case against Ripple Labs, which found that most secondary market sales do not represent “investment contacts” or a securities offering.

See also: SEC’s Gensler ‘Disappointed’ by Part of…