WASHINGTON (Diya TV) — In a significant win for the Securities and Exchange Commission (SEC), a judge ruled on Wednesday that the SEC’s lawsuit against Coinbase, accusing the cryptocurrency exchange of engaging in unregistered sales of securities, will proceed to trial.
Following the ruling in Manhattan federal court, Coinbase experienced a 2.5% drop in its shares. The lawsuit, filed by the SEC in June, alleged that Coinbase was operating as an unregistered broker and exchange, seeking to permanently restrain the company from these activities.
U.S. District Judge Katherine Polk Failla, in her decision, stated that despite the relatively recent emergence of cryptocurrencies, the transactions in question align with the longstanding framework used by courts to identify securities. She affirmed that the SEC adequately alleged Coinbase’s involvement in the unregistered offer and sale of securities through its Staking Program.
However, the judge dismissed the SEC’s claim regarding Coinbase’s role as an unregistered broker in connection with its Wallet application.
Coinbase’s Chief Legal Officer, Paul Grewal, responded to the ruling by expressing readiness for further legal proceedings. He highlighted the company’s anticipation of uncovering more about the SEC’s internal perspectives on crypto regulation.
The SEC’s decision to file the notice of Failla’s ruling in the Coinbase case within its lawsuit against Binance, another major cryptocurrency exchange, underscores the broader regulatory scrutiny faced by such platforms.
Coinbase’s increasing prominence in Wall Street’s adoption of cryptocurrency is evident, particularly with its involvement as the custody partner for several U.S. spot bitcoin exchange-traded funds approved by the SEC in January. These funds have witnessed substantial inflows since their launch, collectively amounting to approximately $52 billion.
SEC Chair Gary Gensler’s remarks further emphasize the regulatory focus on ensuring compliance within the crypto industry. Gensler has been vocal about the need for registration requirements and mandatory disclosures in crypto securities markets.
With the court ruling paving the way for trial, Coinbase finds itself navigating a pivotal moment in its legal battle. While Grewal remains confident in Coinbase’s legal arguments, the broader implications of this case extend to the regulatory landscape governing the cryptocurrency ecosystem.
