The Securities and Exchange Commission (SEC) is asserting that cryptocurrencies do not possess any “innate or inherent value” in its ongoing case against Coinbase Inc. in federal court
The SEC’s argument comes in response to Coinbase’s motion to dismiss the agency’s lawsuit filed during the summer. The SEC asked the judge to disregard Coinbase’s argument that cryptocurrency trading is not an investment contract between parties. They backed their stance by reiterating that federal securities laws are designed to be interpreted flexibly, thanks to the legal doctrine known as the “Howey Test.”
Under the Howey Test, the SEC has contended for decades that investments ranging from whiskey caskets to chinchilla farms can be regulated as investment contracts. However, they argue that many cryptocurrencies differ only because they “have no innate or inherent value.”
The SEC’s stand was promptly dismissed by Coinbase’s chief legal officer, Paul Grewal, who termed their motion as “more of the same old same old” stance. Grewal stated, “The SEC’s arguments today would mean that everything from Pokemon cards to stamps to Swiftie bracelets are also securities.”
Ripple Labs’ chief legal officer, Stuart Alderoty, also took to Twitter to ridicule the SEC’s argument. He questioned the SEC’s claim that digital assets have no innate or inherent value while collectible baseball cards do.
In its June 6 lawsuit against Coinbase, the SEC listed several altcoins it considered unlicensed securities, including Solana, MATIC, and Cardano. The developers for these tokens, as well as Coinbase, have strongly disputed this designation.
The question of the value of cryptocurrencies has been asked since the inception of the technology. Unlike fiat currency like the U.S. dollar, tokens do not have the legal backing of a government entity, and their value is mostly determined by the market forces of supply and demand.
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