Coinbase vs SEC Lawsuit Heats Up Over “Inherent Value” of Cryptocurrencies

The SEC has once again successfully gained criticism and is the leader of a hot topic with its recent argument in the SEC vs Coinbase lawsuit. A part of its argument is that cryptocurrencies have ‘no innate or inherent value.’

SEC’s Response to Coinbase’s Pre-Trial Judgement

The SEC asked the Court to reject Coinbase’s argument that cryptocurrency trading does not constitute an investment contract between parties in response to Coinbase’s request for pre-trial judgment. It reiterated its claim that the federal securities laws are intended to be read broadly by the “Howey Test,” a legal principle, to support its argument.

The SEC has maintained under Howey for decades that various investments, including chinchilla farms and whiskey caskets, can be governed as investment contracts. While the tokens it identified in its case fit the requirements of Howey, it claims that many cryptocurrencies only vary from one another because they “have no innate or inherent value” on their own.

The SEC in its recent motion dated 03/10/2023, states – 

“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—it is tied to its underlying value, which for the crypto assets at issue in this case, is the investment contract. Without the access to a service or the intellectual property those crypto assets signify, they would be worthless. After all, investors are not purchasing those assets to own a digital sequence of letters and numbers.”

Coinbase CLO’s Response to the SEC’s Motion 

Coinbase’s Chief Legal Officer Paul Grewal took to X to voice his dismay at how SEC continues to argue with the same old point. In a thread of 7 posts, he further clarifies why the SEC’s arguments are “more of the same old same old.” 

Paul Grewal states that the SEC is making the same claims as to what the law is or must be without any legal citation. This can be seen in the recent motion’s pages 8,17-18, and 21.  
He further mocks the SEC’s arguments, stating that as per its justifications of what is or is not a ‘security’ (aka an investment contract), “everything from Pokemon cards to stamps to Swiftie bracelets is also securities”.