Coinbase vs SEC Face-off: Will The Coinbase Lawsuit be Dismissed?
Jan 19, 2024
The SEC’s war on crypto platforms and service providers continues. However, Coinbase is fighting back this time by filing a motion to drop the case and challenge the SEC’s ruling over the crypto market.
The Coinbase lawsuit has been one of the hottest topics of 2023, as the SEC sued the largest crypto exchange platform for selling unregistered securities and offering staking programs of unregulated contracts.
Will the New York court overrule the SEC’s accusations? How will the Coinbase and SEC battle end?
Coinbase is appealing at the New York court to drop the SEC’s case against it.
In June 2023, the SEC accused Coinbase of trading unregistered securities on its platform and named 13 tokens, including Solana, Cardano, Polygon, Sandbox, and others.
The claim is that these digital assets are deemed nationally tradable securities and should have been registered with the US regulatory authority.
The SEC indicates that Coinbase is not registered as a broker or a national security contract trader, making these offerings illegal in the eyes of the SEC.
In its defense, Coinbase argues that they were never required to be registered as brokers when the company made its public offering back in 2021.
This is not the first jab from the SEC against cryptocurrencies, as Binance faced a similar case in 2023, right after the Coinbase lawsuit, which was concluded by Binance paying $2.7 billion in settlements.
What is Unregistered Securities?
The SEC defines tradable contracts or securities as assets associated with registered entities or businesses in the US. Therefore, it perceives the tokens Coinbase lists in its platform as national securities.
However, since Coinbase performs as a crypto business and is not registered as a national security broker, the SEC puts these tokens under the unregistered securities meaning.
Similarly, the SEC call on Coinbase staking campaigns states that these programs involve assets issued by networks backed by registered organizations, making them legally binding investment contracts.
The crypto platform issued an 18-page-long statement indicating that its staking programs are not conventional investment contracts that must be registered.
Staking, as Coinbase says, involves locking up assets to contribute to the overall network development, which is different from money investment, which disqualifies it from registration at the SEC.
Why is it Important?
The Coinbase news is significant because it involves one of the largest and most influential crypto exchanges in the world. Therefore, the outcomes of this ruling are more likely to shape the future of cryptocurrencies, especially with the news beating around spot Bitcoin ETF trading.
According to a US attorney, dismissal cases are very rare, especially when they involve the SEC and crypto assets. However, the hopes are in the judge’s history with similar lawsuits, who previously dropped a case against Uniswap, who was accused of offering scam tokens.
This case is part of a series of crackdowns by the SEC on crypto assets and exchanges after the infamous FTX case. Gary Gensler, the chairman of the US regulatory body, has been on a consistent call to regulate cryptocurrencies and require exchanges to register as brokers.
However, crypto communities largely oppose this step because it contradicts the fundamentals of decentralized economies and transactions.
Coinbase’s international influence made the whole world wait for this trial, and we can only wait for the outcomes of this hearing, which is more likely going to change the fate of cryptocurrencies forever.