In this illustration from June 8, 2023, a smartphone is placed on a keyboard with the Coinbase logo displayed and cryptocurrency representations.
Ruvic cube | Reuters
The Securities and Exchange Commission won a major victory in its lawsuit against it Coinbase On Wednesday, a judge ruled that his claim that the cryptocurrency exchange engaged in unregistered securities sales could be heard by a jury in court.
Coinbase shares fell about 2.5% after news that the Manhattan federal court rejected its motion to dismiss the SEC complaint.
The regulator first filed a lawsuit against Coinbase in June, claiming the company was trading as an unregistered broker and exchange. The agency also requested that the company be “permanently restrained and ordered” from continuing to do so.
In her ruling Wednesday, U.S. District Judge Katherine Polk Failla wrote: “The ‘crypto’ nomenclature may be recent, but the challenged transactions fall easily within the framework that courts have used to identify securities for nearly eighty years.”
“The court concludes that the SEC adequately alleges that Coinbase engaged in the unregistered offer and sale of securities through its staking program,” Failla wrote.
Elsewhere in this ruling, the judge agreed to reject the SEC’s claim in the lawsuit that Coinbase acted as an unregistered broker by making its wallet application available to customers.
The company responded to CNBC’s request for comment with a link to a series of posts on social media platform X by Paul Grewal, Coinbase’s chief legal officer.
“We were prepared and look forward to learning more about the SEC’s internal views and discussions on crypto regulation,” Grewal wrote.
Later on Wednesday, the SEC filed a notice of Failla’s decision in the Coinbase case as part of a lawsuit it has pending in federal court in the District of Columbia against Binance, another major cryptocurrency exchange. In this lawsuit, the SEC accuses Binance of making multiple unregistered offers and sales of crypto asset securities.
Wednesday’s decision news comes as Coinbase is taking a larger role in cryptocurrency adoption on Wall Street.
In January, the SEC approved a series of US spot Bitcoin exchange-traded funds. Many of these ETFs have worked with Coinbase as their custody partner.
These US spot funds have seen record inflows since their launch in January. Together they have raised around $52 billion.
In June, SEC Chairman Gary Gensler said on CNBC that trading platforms like Coinbase “call themselves exchanges” but “merge a number of features.”
“We do not believe that the New York Stock Exchange operates a hedge fund,” Gensler said at the time.
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2024-03-28 06:58:19
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