According to legal documents, a hearing scheduled on July 13 between Coinbase vs SEC should provide an understanding of the exact problem of the case and its potential effect on the larger crypto business.
The hearing, which was previously set for August, is a standard request made by any party demanding a judgment on a specific topic before the case. Coinbase, the popular crypto exchange, filed a request in this case in late June. The exchange wishes Judge Katherine Polk Failla to reject the regulator’s case, which was filed on June 5.
Coinbase vs SEC: What is the Lawsuit All About?
The SEC filed the case in early June, accusing Coinbase of acting as a broker, exchange, and clearinghouse for unregistered securities. Furthermore, the SEC argues that 13 distinct cryptocurrencies offered on the market fulfill the Howey Test. The Howey Test is a legal analysis used in the United States to evaluate if a transaction fits as an investment agreement, suggesting that it should be categorized as a security under federal law.
If both sides engaged in the lawsuit fail to agree, it is predicted that the present dispute will last for several years. Similar to the SEC vs. Ripple Labs dispute, which has been underway for three years now.
However, today’s pre-motion hearing is intended to determine the tone for the action and provide light on its possible implications for the entire crypto market. The result might have a substantial impact on other exchanges and industry participants. Binance, for example, is navigating compliance with federal securities rules.
Coinbase has also been diligent in its legal defense. When it got a Wells Notice from the SEC, it signaled its plans by writing a blog post. Furthermore, the exchange claims that the SEC’s activities breach its due process rights. And that by filing the case, the government is aiming to get ahead of Congress.
What Happened In The First Coinbase vs SEC Hearing?
As the first session between the parties, the conference would most likely be “procedural and administratively heavy,” according to securities and regulatory attorney Mark Kornfeld.
“Coinbase is going to attempt this case as one suitable for early termination for any number of reasons, including that the crypto tokens are not securities under the Howey test, and thus the commission has exceeded its jurisdictional legitimacy,” he said.
The SEC made severe criticisms of the exchange in its response to the action on July 7, including that it was conscious of potential securities law breaches and that it is considering “ignoring more than 75 years of governing law under Howey” in an effort “to create its own examination for what constitutes an investment agreement.”
Coinbase’s proposal also mentions its upcoming IPO in 2021. As per the exchange, the SEC is now pursuing penalties for earlier conduct that were “exhaustively described” to lawmakers and the wider public.
Since the SEC was conscious of Coinbase’s business operations, the accusation could not have been sufficient for success in a court action. The federal securities regulations guiding the “going public” manager, according to business and securities lawyer Roland Chase, are disclosure-based. “All parties granted permission for the SEC to look over public records, give comments, and raise questions to enhance a company’s disclosure to prospective investors,” Chase told Cointelegraph.
Chase’s Statement on The Coinbase vs SEC Hearing
Chase mentioned that to become public, Coinbase stated to the SEC that it will submit each asset to a thorough legal investigation before letting it trade on the site to guarantee securities are not exchanged. “The SEC ultimately grew comfortable with all of this disclosure and approved Coinbase to go public,” he continued, adding that the SEC “now believes Coinbase is trading securities on its platform. Furthermore, it believes Coinbase is selling its own unregulated securities.”
Without a contract between the parties, the lawsuit might go on for years. A prominent instance of this is Ripple’s legal struggle, which has been ongoing since 2020 when the SEC declared its coin, XRP, to be a security. Ripple CEO Brad Garlinghouse stated in a recent interview on the current dispute that the SEC “intentionally set up uncertainty about the regulations, and they utilized the misunderstanding through enforcement.”
Closing Thoughts
In the first Coinbase vs SEC hearing, SEC has failed in the case and Coinbase has proved from its side. Ripple vs SEC case is also moving forward in a positive way for the crypto community. Let’s see how the further proceedings will go on.
