The SEC Goes Back to Court

Last summer, the U.S. Securities and Exchange Commission (SEC) sued crypto exchanges Coinbase and Binance, alleging they listed and traded unregistered securities in the form of various cryptocurrencies. This week, the regulator’s legal teams faced the exchanges in court as the companies argued the SEC did not make the case that those cryptos are securities.

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The narrative

There’s no rest for the weary: While the story last week was about whether or not the SEC would approve spotbitcoin exchangetraded funds (ETFs) and the rough sequence of events that occurred before the approval was final, this week found us back in court as the regulator’s Enforcement Division argued that it has a case to make about cryptos being securities.

Why it matters

A hefty chunk of the U.S. crypto industry may well hinge on how the SEC’s cases against Coinbase, Binance/Binance.US and Kraken play out. If federal judges agree that various digital assets are securities, and the SEC has the latitude to say which are, that’ll impose new registration and reporting requirements on issuers and trading platforms. If, instead, judges find consensus in saying that the SEC has overreached or that Congress should create some tailored laws, that’ll give a green light to a huge chunk of the industry.

Breaking it down

In June 2023, the SEC sued Coinbase and Binance, alleging the companies listed digital assets like solana (SOL), filecoin (FIL) and axie infinity (AXS), among others, but that these assets were really unregistered securities.

The industry – naturally – was pretty upset about these suits, despite SEC Chair Gary Gensler telegraphing for quite a while that these suits would happen. Over the course of the last few months, we’ve seen lawmakers, industry lobbyists and others file amicus briefs urging the courts to agree with the defendants’ motions to dismiss the cases entirely.

Jesse Hamilton previewed Wednesday’s Coinbase hearing here, and a lot of the core ideas are functionally identical to the Binance case. The entire article is worth your attention of course, but one of his most important points may be that a dismissal at this stage is unlikely.

Judge…