Coinbase Faces Setback in SEC Lawsuit: What This Means for Cryptocurrency Investors
In a recent development, the Securities and Exchange Commission (SEC) has scored a major win in its lawsuit against Coinbase, the popular cryptocurrency exchange. A judge ruled that the SEC’s claim that Coinbase engaged in unregistered sales of securities could proceed to trial, dealing a blow to the company. This ruling sent Coinbase shares tumbling around 2.5% lower, as investors reacted to the news.
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The SEC first filed suit against Coinbase in June, alleging that the company was acting as an unregistered broker and exchange. The agency demanded that Coinbase be “permanently restrained and enjoined” from continuing to do so. The judge’s ruling stated that the SEC adequately alleged that Coinbase, through its Staking Program, engaged in the unregistered offer and sale of securities. However, the claim that Coinbase acted as an unregistered broker by making its Wallet application available to customers was dismissed.
Coinbase’s chief legal officer, Paul Grewal, responded to the ruling by stating that the company was prepared for this outcome and looks forward to uncovering more about the SEC’s internal views and discussions on crypto regulation. This development comes at a time when Coinbase is playing a significant role in Wall Street’s adoption of cryptocurrency. The company has been involved in the approval of U.S. spot bitcoin exchange-traded funds by the SEC, with many of these ETFs partnering with Coinbase as their custody partner.
These U.S. spot funds have seen record flows since their launch in January, collectively bringing in around $52 billion. SEC Chair Gary Gensler has expressed concerns about trading platforms like Coinbase, stating that they “call themselves exchanges” but are “commingling a number of functions.” Gensler highlighted the need for clearer regulation in the cryptocurrency space, pointing out the risks associated with these platforms.
The ruling against Coinbase in the SEC lawsuit has raised questions about the future of cryptocurrency regulation and the role of exchanges in the market. Investors are keeping a close eye on developments in this case, as it could have far-reaching implications for the industry. As the popularity of cryptocurrencies continues to grow, regulatory scrutiny is intensifying, with authorities cracking down on exchanges that fail to comply with existing laws.
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In conclusion, the ruling against Coinbase in the SEC lawsuit underscores the challenges facing the cryptocurrency industry as it seeks to establish itself as a legitimate asset class. Investors should closely monitor regulatory developments and ensure compliance with all applicable laws and regulations. As the market continues to evolve, it is essential for participants to stay informed and adapt to changing conditions. Stay tuned for further updates on this developing story..
A smartphone with displayed Coinbase logo and representation of cryptocurrencies are placed on a keyboard in this illustration taken, June 8, 2023.
Dado Ruvic | Reuters
The Securities and Exchange Commission scored a major win in its lawsuit against Coinbase on Wednesday, as a judge ruled that its claim that the cryptocurrency exchange engaged in unregistered sales of securities could be heard by a jury at trial.
Coinbase shares fell around 2.5% lower on news of the ruling in Manhattan federal court rejecting its bid to dismiss the SEC’s complaint.
The regulator first filed suit against Coinbase in June, alleging that the company was acting as an unregistered broker and exchange. The agency also demanded the company be “permanently restrained and enjoined” from continuing to do so.
“The ‘crypto’ nomenclature may be of recent vintage, but the challenged transactions fall comfortably within the framework that courts have used to identify securities for nearly eighty years,” U.S. District Judge Katherine Polk Failla wrote in her ruling.
“The Court finds that the SEC adequately alleges that Coinbase, through its Staking Program, engaged in the unregistered offer and sale of securities,” Failla wrote.
The judge elsewhere in that ruling agreed to dismiss 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 X by Coinbase’s chief legal officer, Paul Grewal.
“We were prepared for this, and we look forward to uncovering more about the SEC’s internal views and discussions on crypto regulation,” Grewal wrote.
The news comes as Coinbase takes on a bigger role in Wall Street’s adoption of cryptocurrency. In January, the SEC approved a raft of U.S. spot bitcoin exchange-traded funds. Many of these ETFs have partnered with Coinbase as their custody partner.
These U.S. spot funds have seen record flows since launching in January. Collectively, they have brought in around $52 billion.
In June, SEC Chair Gary Gensler said that trading platforms like Coinbase “call themselves exchanges” but were “commingling a number of functions.”
“We don’t see the New York Stock Exchange operating a hedge fund,” Gensler said on CNBC in June.
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Dan Mangan,MacKenzie Sigalos said SEC scores big win in lawsuit against crypto exchange Coinbase
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