Coinbase
and the US Securities and Exchange Commission (SEC) had
their first face-off today (Thursday) following the securities
regulator’s charges against the cryptocurrency exchange in early June. During the pre-motion hearing,
both parties argued what
passes as a security and crypto staking. The
debate also touched on Coinbase’s registration by SEC in 2021 and the application of the ‘major
questions doctrine’ to the case.
SEC in its complaint against Coinbase last month claimed that the crypto
exchange operates illegally
as an exchange, broker and clearing agency. On Thursday,
Judge
Katherine Polka of the US District Court for the Southern District of New York
questioned both parties on claims made by the SEC in its
complaint and those by Coinbase in its 177-page-long
response.
On SEC’s
approval of Coinbase’s application to go public in 2021, the crypto exchange
noted that several of the tokens the securities watchdog flagged as unregistered securities in its complaint were mentioned in its initial public offering
(IPO) filings. However, SEC responded that permitting the IPO does not
translate to an endorsement of the exchange’s activities.
Previously, Coinbase argued that the securities regulator lacked the legal power to regulate
its business. It also cited the ‘major questions doctrine’, suggesting that the SEC
overstepped its legal authority in trying to regulate cryptocurrencies listed on its platform as securities.
On Thursday, Coinbase repeated the argument, asking that the court dismisses the
case. Finance Magnates reported that the SEC previously faulted this proposition, saying Coinbase
‘misapprehends the purpose and reach’ of the doctrine.
The first
court hearing on Thursday is an important one for the cryptocurrency industry.
The SEC for years has claimed that certain cryptocurrencies are unregistered securities. The outcome of
the case against Coinbase, the largest cryptocurrency exchange in the United
States, could have great implication
on how the digital asset industry
in the world’s largest economy is regulated and structured.
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