Cryptocurrency exchange Gemini has filed a reply brief as part of its efforts to dismiss the lawsuit it is facing against the United States Securities and Exchange Commission (SEC).
The lawsuit alleges that Gemini Earn — a service enabling customers to lend crypto assets like Bitcoin (BTC) to Genesis — breached securities regulations by offering unregistered securities.
According to Aug. 18 court documents filed in the U.S. District Court for the Southern District of New York, Gemini argued that the SEC has failed to make a clear claim.
“Section 5 of the securities act is not hard to understand,” the filing stated while arguing that the SEC has not clearly pointed out the requirements for claiming a violation of the act:
“The fact that the SEC cannot decide what is the security at issue only underscores the weakness of its position.”
It further argued that the court shouldn’t tackle the “convoluted analyses” presented by the SEC, and the agency should pose straightforward questions to determine whether it qualifies as a security.
It prompted questions including: When was the alleged security sold? Who was the buyer? Who was the seller? What price was offered or charged?
Gemini also contended that the SEC must highlight the unregistered security first, then identify the sale or offer to sell that security. It claimed the SEC had not fulfilled this.
“However, the SEC has not met that burden, and its opposition avoids the question before the court,” the filing stated.
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On May 27, Gemini argued in a court filing that transactions carried out within the Gemini Earn program were essentially loans, requesting that the SEC dismiss the complaint.
On Aug. 19, Jack Baugham, a founding partner of JFB Legal, which represents Gemini, made a statement on X (formerly Twitter), suggesting that the SEC is changing its argument as the lawsuit goes on.
“The SEC is floundering. They can’t even decide what the security is,” Baugham stated, highlighting the confusing nature of the regulator’s argument:
“On the one hand, they claim that the Loan Agreement was a security. On the other hand, they claim that the entire Gemini Earn program was itself a security — an argument absurd on its face.”
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