The United States Securities and Exchange Commission (SEC) has scored a partial victory in its legal battle against Coinbase, the leading U.S.-based cryptocurrency exchange.
The ruling allows the SEC to proceed with its lawsuit against Coinbase, which says that the platform's Staking Program involves the unregistered offer and sale of securities. At the same time, the court agreed to toss the claim that the exchange acted as an unregistered broker via its Wallet application.
The decision comes as a blow to Coinbase, which had sought to dismiss the lawsuit.
The leading U.S. crypto exchanges argued that cryptocurrencies do not fall under the jurisdiction of the SEC, akin to company shares.
Yuri MolchanThe SEC's suit, which was filed last June, claims that several cryptocurrencies available on Coinbase are securities.
U.S. District Court Judge Katherine Polk Failla previously questioned the agency's interpretation of the law during a hearing.
However, Failla denied the defendant's motion, citing the SEC's sufficient pleading that Coinbase operates as an exchange, broker and clearing agency under federal securities laws.
The court decision was unexpected. Prominent Bloomberg analyst Elliot Stein estimated a 70% likelihood of Coinbase winning the motion to dismiss the regulator's lawsuit.
Following the court's decision, both parties are now gearing up for a discovery phase. In his statement, Paul Grewal, chief legal officer at Coinbase, has clarified that his company was prepared for the setback. "We were prepared for this, and we look forward to uncovering more about the SEC’s internal views and discussions on crypto regulation," he wrote on X. Grewal has added that early motions against government agencies tend to be denied, but Coinbase remains "confident" in its legal arguments.
At press time, Coinbase shares are down more than 2% on the news. Bitcoin and major altcoins have also registered minor losses over the past hour.
Yuri Molchan
Tomiwabold Olajide
Vladislav Sopov
Dan Burgin