In a highly anticipated judgment with significant implications for the crypto industry\u2019s legal battles against regulators in the United States, the court overseeing the Coinbase and US Securities and Exchange Commission (SEC) legal battle has delivered a ruling.\u00a0<\/p>\n
The court found against the crypto firm, supporting the SEC\u2019s claims that the platform operated as an exchange, broker, and clearing agency. However, the court also sided with the US-based exchange on certain SEC claims regarding its wallet. As a result, the case will proceed, marking a pivotal moment in the ongoing dispute.<\/p>\n
The court\u2019s decision<\/a> stemmed from the SEC\u2019s allegations that Coinbase facilitated transactions in crypto-asset securities without proper registration, violating Sections 5, 15(a), and 17A(b) of the Exchange Act.\u00a0<\/p>\n The SEC contended that Coinbase acted as a marketplace, bringing together buyers and sellers of \u201ccrypto-asset securities\u201d, while also serving as a custodian of securities through its wallet system. In this regard, the court denied the exchange\u2019s motion to dismiss Counts I, II, and III of the complaint, affirming the SEC\u2019s claims.<\/p>\n Furthermore, the court found that Coinbase\u2019s parent company, CGI, could be held liable as a control person of Coinbase under Section 20(a) of the Exchange Act. It determined that CGI exercised power and control over the crypto firm, managing and directing its operations, thus denying Coinbase\u2019s motion to dismiss Count IV.<\/p>\n Regarding the exchange\u2019s Staking Program, the court agreed with the SEC\u2019s argument that it constituted an investment contract under the Howey Test, making it subject to registration under the Securities Act.\u00a0According to the ruling, the program allowed customers to stake various crypto assets, and the court found that Coinbase\u2019s managerial efforts provided financial returns, meeting the definition of an investment contract.\u00a0<\/p>\n As a result, the court concluded that the SEC adequately alleged the exchange\u2019s unregistered offer and sale of securities, denying Coinbase\u2019s motion for judgment on the pleadings.<\/p>\n However, the court granted Coinbase\u2019s motion concerning the SEC\u2019s claims concerning its Wallet application. While the SEC alleged that the crypto firm conducted brokerage activity through Wallet, the court found the factual allegations insufficient to support the inference that the exchange acted as an unregistered broker.<\/p>\n Finally, both parties are directed to submit a proposed case management plan by the court on or before April 19, 2024.\u00a0<\/p>\n Commenting on the potential implications of this outcome, Edward Snowden wrote<\/a> the following on his X account:<\/p>\n This doesn\u2019t bother me. If the SEC keeps acting in bad faith like this, they\u2019re going to lose so hard in court that they\u2019ll never be able to do this to anyone ever again. Remember when the SEC got spanked so badly that Gensler had to approve BTC ETFs with tears in his eyes? yeah<\/p>\n<\/blockquote>\n <\/p>\n Featured image from Shutterstock, chart from TradingView.com<\/p>\n<\/span>Mixed Ruling<\/span><\/h2>\n
\n