The SEC’s handling of the Green United case offers insights into its potential approach to Coinbase’s motion to dismiss, emphasizing the significance of the “major questions doctrine” in cryptocurrency lawsuits.
The recent actions by the US Securities and Exchange Commission (SEC) in its lawsuit against crypto miner Green United highlight how the securities regulator could approach the case against Coinbase. Last month on July 31st, the SEC recorded a win after District Judge Jed Rakoff denied the motion by Terraform Labs to dismiss the case, thereby rejecting all the arguments relying on the “major questions doctrine”.
Crypto miner Green United used the same arguments in its motion to dismiss. The argument relies on the “major questions doctrine” which has been the centerpiece for crypto defendants, including crypto exchange Coinbase, in their cases against the SEC.
However, during the August 4 filing last week, the SEC noted that Terraform Labs’ ruling provides them additional authority to reject Green United’s major questions doctrine along with fair notice defenses. The SEC’s letter notes:
“The court rejected defendants’ arguments that the “Major Questions Doctrine” and the Due Process Clause “prevent the SEC from alleging the company’s digital assets to be ‘investment contracts’. Accordingly, Terraform Labs is relevant to this matter because it provides additional authority for rejecting Defendants’ “Major Questions Doctrine” and fair notice defenses.”
Will the SEC Reject Coinbase’s Motion?
The SEC’s recent arguments might offer insights into its potential approach to Coinbase’s motion to dismiss, which was also submitted on August 4th. In Coinbase’s motion to dismiss the SEC lawsuit, the cryptocurrency exchange also contended that the major questions doctrine should apply, as the SEC sought to regulate the secondary market for cryptocurrency trading.
The major questions doctrine was introduced through a Supreme Court decision in 2022, where it was outlined that Congress intends to formulate policy decisions and does not delegate authority to agencies without clear authorization from legislators, which is required for their regulatory jurisdiction.
In the SEC vs Terraform case, the judge also found that Terraform “cannot wield a doctrine intended to be applied in exceptional circumstances as a tool to disrupt the routine work that Congress expected the SEC and other administrative agencies to perform”.
Previously, the SEC has used other rulings to bolster its arguments in similar cases. In April, it wrote a letter to the judge overseeing the SEC vs. Ripple Labs case, emphasizing a judge’s choice in a lawsuit it had won. This lawsuit established that an established court precedent offers adequate fair notice.