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A federal judge has ruled that the U.S. Securities and Exchange Commission’s case against cryptocurrency exchange Coinbase can proceed, denying Coinbase’s motion to dismiss the charges.
In an 84-page decision issued today, U.S. District Judge Katherine Failla of the Southern District of New York found that the SEC had sufficiently alleged that Coinbase operates as an unregistered exchange, broker, and clearing agency in violation of federal securities laws. The judge also allowed the SEC’s claim that Coinbase’s staking program constitutes an unregistered securities offering to move forward.
According to Judge Failla:
The Court finds the SEC has sufficiently pleaded that Coinbase operates as an exchange, as a broker, and as a clearing agency under the federal securities laws, and, through its Staking Program, engages in the unregistered offer and sale of securities.
Coinbase’s Outlook
For Coinbase, the decision represents a setback, but the company remains resolute in its legal battle. Chief Legal Officer Paul Grewal signalled Coinbase’s preparedness for the ruling and eagerness to delve into the SEC’s internal deliberations on crypto regulation during the forthcoming discovery phase. The company views this process as a critical opportunity to uncover insights that could bolster its defense.
Legal experts anticipate a prolonged legal tussle ahead, drawing parallels to the SEC’s case against Ripple. Fox Business journalist Eleanor Terrett predicted that the discovery process alone could span months, followed by summary judgment briefs and a potential trial, indicating the case could stretch over a year at the very least.
The ruling has reignited calls from the crypto industry for comprehensive legislation from Congress to provide clarity on digital asset regulation. Grewal urged lawmakers to capitalize on recent momentum and advance a comprehensive legal framework, underscoring the industry’s desire for regulatory certainty to foster innovation within the United States.
Grewal said:
Looking ahead, we remain confident in our legal arguments, we look forward to proving we’re right, we are eager for the opportunity to take discovery from the SEC for the first time, and we appreciate the Court’s continued consideration of our case.
However, the ruling tees up a protracted legal fight, with discovery, potential summary judgment motions, and possibly even a trial still to come before any final resolution in the case. Industry observers expect the process could drag on for over a year.
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