In a court hearing scheduled for Wednesday, Coinbase will argue that the U.S. Securities and Exchange Commission (SEC) should drop its case against the platform. Coinbase argues that tokens traded on its platform are not comparable to securities and, therefore, the SEC’s regulatory overreach should be rejected.
This court battle is being closely monitored by the crypto community, as it could provide clarity on the SEC’s jurisdiction over the digital asset sector. Coinbase’s main argument revolves around claims that the SEC is exceeding its authority and that the assets listed on its platform are not securities, differentiating them from traditional stocks or bonds.
The SEC filed a lawsuit against Coinbase in June, alleging that the exchange facilitated the trading of at least 13 crypto tokens that should have been registered as securities. The regulator also accused Coinbase of illegally operating as a national stock exchange, broker and clearing house without proper registration.
One particular point of contention is Coinbase’s “staking” program, in which the platform pools resources to verify activity on blockchain networks and reward customers. The SEC argues that this program should have been registered with the agency.
⚠️ COINBASE AND SEC FACE IN FEDERAL COURT OVER CRYPTO REGULATOR’S AUTHORITY
(Reuters)Coinbase will argue in a court hearing on Wednesday that the US securities regulator should drop the case against it because the tokens traded on its cryptocurrency exchange are not similar to… pic.twitter.com/SvAbqSMynS
– PiQ (@PiQSuite) January 17, 2024
Coinbase draws inspiration from Ripple Labs case in SEC lawsuit
Coinbase is not alone in disputing the SEC’s position. Other cryptocurrency companies share similar views, collectively arguing that most tokens do not meet the definition of security and that legislation is needed to regulate the industry.
In August, Coinbase sought to dismiss the SEC lawsuit, citing a separate case involving Ripple Labs, in which a judge found that the company did not violate federal securities law by selling its XRP crypto token on public exchanges. Coinbase considers this ruling a significant victory for the cryptocurrency industry. However, the SEC argues that the case against Coinbase should move forward, citing a different court ruling in the case of cryptocurrency developer Terraform Labs, which supported the regulator’s position.
