The U.S. Securities and Exchange Commission (SEC) has shown no signs of backing down in its ongoing lawsuit against Coinbase Global. ON TUESDAY, the SEC requested a federal judge to reject Coinbase’s plea to dismiss the lawsuit. Moreover, the regulator argued that the crypto exchange had been operating illegally as a national securities exchange, broker, and clearing agency, all without registering with the SEC.
In its pushback against Coinbase’s motion to dismiss the case, the SEC cited a recent ruling involving Terraform Labs. This decision effectively rebuffed the court’s earlier reasoning in the Ripple Labs case. Significantly, the Ripple case has been widely celebrated in the crypto industry as a landmark win. The SEC’s reliance on the Terraform Labs ruling raises concerns about the stability of the Ripple judgment.
Legal precedents and the SEC’s scope
Coinbase had argued that the assets and services it dealt with did not qualify as securities, thereby asserting that the SEC had no jurisdiction to sue them. However, the SEC countered this by claiming that, with the exception of the Wallet application, Coinbase did indeed serve as an exchange, broker, and clearing agency. Hence, the legal skirmish essentially boils down to whether Coinbase engaged in transactions involving investment contracts and, therefore, securities. The SEC holds the view that it did.
Additionally, the SEC’s assertive stance brings to light broader implications for the cryptocurrency community. Under the leadership of Chair Gary Gensler, the SEC maintains that most cryptocurrencies fall under the ambit of securities, thereby subjecting them to investor protection rules. Conversely, Coinbase argues that many digital assets do not qualify as securities and should therefore fall outside the SEC’s jurisdiction.
This ongoing legal battle is being keenly observed not just by the parties directly involved but also by the broader crypto industry. The outcome will have a substantial influence on the legal status of cryptocurrencies and could shape regulatory practices for years to come.
As the SEC continues doubling down on this case, it becomes increasingly clear that the commission is unwilling to relent in its enforcement actions. While the SEC holds that it is acting well within its scope, Coinbase, on the other hand, accuses the regulator of exceeding its jurisdiction. Consequently, the court’s eventual ruling will be a watershed moment in defining the contours of the SEC’s authority over crypto assets.
