A federal judge in Manhattan has allowed the U.S.
Securities and Exchange Commission (SEC) to proceed with its lawsuit against
Coinbase, the largest U.S. cryptocurrency exchange.
While dismissing one of the regulator’s claims, the
decision paves the way for a potentially lengthy legal battle. This action
marks a significant development in the ongoing regulatory scrutiny faced by
digital asset companies, Reuters reported.
U.S. District Judge Katherine Polk Failla partly
granted Coinbase’s motion to dismiss the SEC’s lawsuit, which accuses the
company of violating securities regulations. Despite this partial win, the ruling largely aligns
with the SEC’s approach to cryptocurrency regulation, echoing previous
decisions in favor of the regulator.
Coinbase’s Chief Legal Officer, Paul Grewal, expressed
the exchange’s preparedness for the ruling and reiterated its commitment to
contesting the SEC’s claims. Despite the setback, Coinbase expressed optimism
in its legal arguments and plans to prove its position in court.
The SEC’s lawsuit against Coinbase, initiated in June,
alleges that the exchange facilitated the trading of several crypto tokens that
should have been registered as securities. Additionally, the SEC claims that Coinbase operated
unlawfully as a national securities exchange, broker, and clearing agency
without proper registration.
Judge Failla’s ruling allowed most aspects of the
lawsuit to proceed, except for the SEC’s assertion that Coinbase acted as an
unregistered broker through its wallet application. This legal confrontation
marks a pivotal moment in the SEC’s efforts to apply traditional securities
laws to the rapidly evolving digital asset sector.
Implications for the Crypto Market
Central to the legal dispute is the interpretation of
what constitutes security in the context of cryptocurrency assets. The SEC
has relied on established legal precedents, including a U.S. Supreme Court
ruling, to determine whether certain crypto assets should be considered
securities.
However, Coinbase contends that, unlike traditional
securities, cryptocurrencies do not meet the criteria of deriving returns
solely from the efforts of others. Judge Failla’s decision favored the SEC’s argument,
suggesting that some digital assets listed on Coinbase could indeed be
classified as securities.
Expect ongoing updates as this story evolves.
A federal judge in Manhattan has allowed the U.S.
Securities and Exchange Commission (SEC) to proceed with its lawsuit…
