The <-bsp-bb-link state="{"bbHref":"bbg://securities/13165Z%20US%20Equity","_id":"0000018e-8172-dd73-a18e-c777c7a50000","_type":"0000016b-944a-dc2b-ab6b-d57ba1cc0000"}">US Securities and Exchange Commission-bsp-bb-link> can proceed with its lawsuit against
The SEC adequately alleged that Coinbase engages in the “unregistered sale and offer of securities” and illegally operates as an exchange, a broker and a clearing agency under federal securities laws, US District Judge <-bsp-bb-link state="{"bbHref":"bbg://people/profile/17821116","_id":"0000018e-8172-dd73-a18e-c777c7a60000","_type":"0000016b-944a-dc2b-ab6b-d57ba1cc0000"}">Katherine Polk Failla-bsp-bb-link> said in her <-bsp-bb-link state="{"bbHref":"bbg://screens/bbls%20dd%20X7U5NOV1VB084RPL19M4O68NLQK","_id":"0000018e-8172-dd73-a18e-c777c7a60001","_type":"0000016b-944a-dc2b-ab6b-d57ba1cc0000"}">opinion-bsp-bb-link> Wednesday.
The decision is a blow to Coinbase and other cryptocurrency players who have argued the SEC has no power to regulate them because they don’t traffic in “securities” that have to be registered. The judge, however, dismissed claims that Coinbase’s Wallet application acts as a broker under the US law.
Shares of Coinbase were down 3.7% after falling as much as 4.8%.
“The ‘crypto’ nomenclature may be of recent vintage, but the challenged transactions fall comfortably within the framework that courts have used to identify securities for nearly eighty years,” the judge wrote.
The ruling is a win for the SEC, which has asserted jurisdiction over crypto and has won rulings from several judges in New York in cases claiming authority over crypto firms.
Read More: <-bsp-bb-link state="{"bbDocId":"S7GNJJT0G1KW","_id":"0000018e-8172-dd73-a18e-c777c7a70000","_type":"0000016b-944a-dc2b-ab6b-d57ba1cc0000"}">Coinbase Says Crypto Like Beanie Babies in SEC Case Hearing-bsp-bb-link>
The ruling comes at an early stage of the case in which the judge was asked to decide whether the SEC’s claims, if true, are sufficient for the case to go forward. Coinbase still has opportunity to defeat the case after evidence-gathering or on appeal.
The case “likely enters a prolonged discovery phase of months if not years,” plus appeals, said
“We were prepared for this, and we look forward to uncovering more about the SEC’s internal views and discussions on crypto regulation,” said
The SEC sued Coinbase in June, claiming that, beginning in 2019, Coinbase made billions of dollars illegally promoting the sale of securities. The SEC claims Coinbase has failed to register, as required, as an exchange, a broker and a clearing agency.
“It’s the economic realities of a transaction, not the labels, that determine whether a particular offering constitutes a security,” an SEC spokesperson said in a statement. Failure to register and follow the securities laws deprives investors of “critical protections,” the spokesperson said.
The <-bsp-bb-link state="{"bbHref":"bbg://screens/bbls%20dd%20X1Q6OJJ920O2","_id":"0000018e-8172-dd73-a18e-c777c7ac0001","_type":"0000016b-944a-dc2b-ab6b-d57ba1cc0000"}">case-bsp-bb-link> is Securities and Exchange Commission v. Coinbase Inc., 23-cv-04738, US District Court, Southern District of New York (Manhattan).
(Updates with details of next steps in case.)
--With assistance from
To contact the reporter on this story:
<-bsp-person state="{"_id":"0000018e-8172-dd73-a18e-c777c7b00001","_type":"00000160-6f41-dae1-adf0-6ff519590003"}">Bob Van Voris-bsp-person> in federal court in Manhattan at rvanvoris@bloomberg.net
To contact the editors responsible for this story:
<-bsp-person state="{"_id":"0000018e-8172-dd73-a18e-c777c7b40001","_type":"00000160-6f41-dae1-adf0-6ff519590003"}">Angela Moon-bsp-person> at hmoon43@bloomberg.net
Steve Stroth
© 2024 Bloomberg L.P. All rights reserved. Used with permission.
Learn more about Bloomberg Law or Log In to keep reading:
Learn About Bloomberg Law
AI-powered legal analytics, workflow tools and premium legal & business news.
Already a subscriber?
Log in to keep reading or access research tools.