Coinbase’s Lawsuit Against The SEC Has Resulted In A Big Win For The Agency

(CTN News) – A judge ruled that the Securities and Exchange Commission can have a jury hear its claim that Coinbase engaged in unregistered securities sales in its lawsuit against Coinbase on Wednesday.

After the Manhattan federal court rejected Coinbase’s request to dismiss the SEC’s complaint.

Coinbase’s shares fell around 2.5%.

Coinbase was first sued by the regulator in June, alleging it was acting as an unregistered broker and exchange. Further, the agency requested that the company be “permanently restrained and enjoined” from continuing to engage in these practices.

Judge Katherine Polk Failla stated that although the term “crypto” may be relatively new, the challenged transactions fit comfortably within the framework that courts have used for nearly eighty years to identify securities.

Failla stated in his opinion, “the Court finds that the SEC adequately alleges that engaged in the unregistered offering and sale of securities through its Staking Program.”

By making its Wallet application available to customers, the judge also agreed to dismiss the SEC’s claim that Coinbase acted as an unregistered broker in the lawsuit.

A link to a series of posts by chief legal officer, Paul Grewal, was provided to CNBC in response to its request for comment.

“We were prepared for this and look forward to learning more about the SEC’s internal views and discussions on crypto regulation,” Grewal stated.

On Wednesday, the SEC filed a notice of Failla’s decision in the Coinbase case on the docket of a lawsuit it has pending in federal court in the District of Columbia against Binance, another major cryptocurrency exchange. Binance is accused by the SEC of making a number of unregistered offers and sales of securities pertaining to crypto assets.

The announcement of Wednesday’s decision comes as plays a larger role in Wall Street’s adoption of cryptocurrency.

The Securities and Exchange Commission approved a number of exchange-traded funds that track U.S. spot bitcoin in January. A number of these ETFs have partnered with Coinbase as their custodian.

A record amount of money has flowed into these U.S. spot funds since they were launched in January. Combined, they have generated approximately $52 billion in revenue.

According to Gary Gensler, chair of the SEC, trading platforms like Coinbase “call themselves exchanges,” but “commingle a wide range of functions.”

Gensler said at the time that the New York Stock Exchange does not operate a hedge fund.

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