The Coinbase vs. SEC case takes center stage as the leading exchange is set to argue why its traded tokens are not unregistered securities.
In June 2023, the SEC sued Coinbase, alleging the exchange traded 13 unregistered securities. The case is being heard by Judge Katherine Polk Failla today in the Southern District of New York. Insider reports from the hearing have revealed arguments and questions being asked by Judge Katherine Polk Failla.
The judge scrutinized the Securities Act of 1933 as outdated by quoting pro-Bitcoin Senator Cynthia Lummis’ statement that the 90-year-old law does not consider new technologies like Bitcoin. The Securities Act of 1933 has been the SEC’s go-to guideline for most crypto cases.
A key moment in today’s proceedings occurred when Judge Failla queried the SEC lawyer about Bitcoin’s status as a potential replacement for fiat currency. The SEC lawyer’s response highlights Bitcoin’s distinctiveness due to its lack of an encompassing ecosystem, unlike other tokens that embody a broader investment landscape.
Judge Failla’s concern lies in whether the SEC’s expansive definition of securities could inadvertently encompass a wider range of digital assets, thus impacting investors who might have unknowingly purchased securities. The SEC lawyer affirmed that a favorable ruling for them would classify the disputed tokens as investment contracts, thus potentially granting purchasers the right of rescission or a chance to annul their purchases.
The Coinbase legal team, countering the SEC’s allegations, argued that not all tokens on their platform are devoid of investment contract characteristics. However, they emphasized that the SEC’s complaint lacks substantive allegations to categorically prove that the 13 tokens in question fulfill the criteria of being securities.
Coinbase’s lawyers also referenced the Uniswap case, previously presided over by Judge Failla, to bolster the argument regarding the platform’s non-responsibility for third-party activities. The analogy draws a parallel with the current scenario, emphasizing the technological neutrality of platforms like Coinbase.
