Coinbase Under Regulatory Scrutiny As SEC Lawsuit Moves Forward

A judge from the Federal Court in Manhattan has permitted the US Securities and Exchange Commission (SEC) to continue with a court case against Coinbase. Even as the court rejected one of the regulator’s allegations, this recent ruling marks the start of a potential prolonged legal challenge. Th judgement indicate a significant advancement in the continuing regulatory scrutiny on digital assets companies.

The Sec’s Legal Battle Seeks To Redefine Cryptocurrency Securities

This legal confrontation represents a significant moment in the SEC’s attempts to apply traditional securities laws within the fast evolving digital asset network. The central legal disagreement revolves around the interpretation of what constitutes security in the realm of cryptocurrency.

While the SEC has depends on established legal precedents, including a United State Supreme Court ruling, to resolve the status of certain crypto assets, Coinbase has argued that cryptocurrencies differ from traditional securities as they do not rely solely on the efforts of others for returns.

The SEC’s litigations against Coinbase was instigated in June. It claims that the exchange promoted the trading of various crypto assets that were supposed to be listed as securities. In addition, the SEC asserts that Coinbase carried out unlawful activities as a clearing agency, broker, and nationwide securities exchange without appropriate registration.

Judge Failla’s decision permitted most component of the lawsuit to advance, excluding the SEC allegations that Coinbase operated as an unlicensed broker via its wallet app.

The SEC’s Litigation Accused Coinbase Of Breaking Securities Rules

The judge known as Katherine Failla partially approved Coinbase’s request to dismiss the SEC’s litigation, which accused the firm of breaking securities rules. Notwithstanding this partial success, the judgement mainly coincides with the SEC’s strategy of regulating digital currency, echoing past rulings in support of the regulator.

However, Judge Failla’s verdict favored the SEC’s position, showcasing that some listed digital assets on Coinbase may indeed be classified as securities.

Paul Grewal, the Chief Legal Officer of Coinbase stated that the exchange is very prepared for the judgement and its committed to fighting against the SEC’s allegations. Despite this delay, Coinbase has shown high level of confidence in its Legal defences and wants to support its stance in the court.

In the previous year, Coinbase Global’s requested for specific regulations in the digital asset system. Despite Coinbase’s plea for these regulations, citing deficiencies in current securities laws, SEC Chairman Gary Gensler stated that existing regulations are adequate. He underscores the applicability of existing laws to the cryptocurrency market.