Advertisement
Judge Sides With SEC, Advancing Case Against Coinbase in Setback for Crypto Industry
- The Manhattan Federal Court has denied Coinbase’s motion for dismissal as the legal proceedings move forward.
- The SEC alleges that Coinbase’s Staking Program facilitated the sale of unregistered securities to investors on the platform.
- Coinbase’s Chief of Legal hopes that the lawsuit will become an inflection point for the industry, where regulators and businesses can align their goals.
The Securities and Exchange Commission’s assault upon big crypto players is set to continue, with the US regulators winning a major battle amid its ongoing war.
Related: KuCoin Executives Hit with US Criminal Charges in Billion-Dollar Conspiracy Case
A Manhattan Federal Court Judge has denied Coinbase – the second-biggest crypto exchange – in its attempt to dismiss the SEC lawsuit, meaning the company will come under the microscope for allegedly offering unregistered securities to investors. In a very small victory for Coinbase, the proceedings will not target the separate Coinbase Wallet, an independent storage solution for digital assets.
“Clarity is the ultimate goal” Says Coinbase Chief Legal Officer
The SEC’s case against Coinbase alleges that the crypto exchange “operates as a broker, and as a clearing agency under the federal securities law, and, through its Staking Program, engages in the unregistered offer and sale of securities”. The presiding Judge, Judge Failla, denied Coinbase’s attempt at a dismissal due to believing the SEC had “sufficiently pleaded liability”. In short – the court case will go forward, with case management plans to be submitted prior to late April.
There’s no denying the news comes as a bit of a blow to both Coinbase and the broader crypto industry.
Coinbase’s public share, COIN, is trading 3.5% down on the news. However, Chief Legal Officer Paul Grewal managed to spin a more optimistic light on the Judge’s decision, suggesting the team expected their motion for dismissal to be denied.
…We were prepared for this, and we look forward to uncovering more about the SEC’s internal views and discussions on crypto regulation…Early motions like ours against a government agency are almost always denied. But clarity is the ultimate goal and today’s decision continues us on that path.
Paul Grewal, Coinbase Chief Legal Officer Rather than the legal battle ending up as a vicious smearing contest, Coinbase hopes that it can turn into a learning exercise where the crypto sector can learn more about the SEC’s perspective – and vice versa. It may be a roundabout way for the blockchain industry to gain clarity around how they can and cannot operate within the United States – and how that may impact innovation going forward.
Related: SWIFT to Launch CBDC Platform Following Successful Experiment
While many in the community (perhaps rightfully) are untrustworthy of the SEC, it’s a simple fact the cryptosphere has come to a point where it needs regulation to move forward into the mainstream. Co-operation between regulators and innovators is the only way that will succeed.
Let’s see how the case plays out.
Author
Ben Knight
Ben Knight is a writer and editor from Melbourne with a passion for all things music and finance. He enjoys turning complex topics – especially the technical details of cryptocurrency – into digestible bites that anybody can understand. He acquired his Master’s in Writing, Editing and Publishing from RMIT in 2019 and has run his own creative writing business ever since.
