Coinbase Lawsuit: Lawyers Stake Victory After SEC Fumbles Argument
Summary:
After flawed arguments made by the U.S. securities regulator in a recent court hearing, lawyers foresee a possible victory for cryptocurrency exchange Coinbase in its ongoing lawsuit against the U.S. Securities and Exchange Commission (SEC). The SEC allegedly failed to convincingly distinguish securities from Beanie Babies, with the judge calling out the agency's broad definition of securities. The case, however, is not dismissed and the judge is expected to rule on Coinbase's dismissal motion within the next three months.
Recently, lawyers have pointed out indications that bode well for Coinbase in its legal battle, following a flawed argument by the United States securities regulator in a New York Court. The cryptocurrency exchange has been fighting for the dismissal of a lawsuit filed against it by the United States Securities and Exchange Commission (SEC), which was recently deliberated in a five-hour hearing on January 17.
Jeremy Hogan, a partner at Hogan & Hogan law firm, mentioned in a Twitter post that during the hearing, District Judge Katherine Polk Failla observed that the SEC's test for distinguishing securities would pave the way for a class-action lawsuit against the Beanie Babies' seller. Hogan added that the agency tried, yet mostly failed to disassociate Beanie Babies from securities, due to the SEC's stance aligning Beanie Babies with securities.
Legal Chief of Crypto firm Variant, Jake Chervinsky, noted a significant flaw exposed in the SEC's legal standpoint during the Coinbase hearing: "it turns almost everything globally into a security.” According to Chervinsky, Judge Failla appeared to concur, characterizing the situation as if collectibles are being under the regulation of SEC.
Coinbase's legal chief Paul Grewal recapped the proceedings, stating that the SEC's claim of extensive authority over all types of investments persists, while no particular barrier to its definition of the investment contract is offered.
During the hearing, some arguments were centered around the major questions doctrine—a 2022 Supreme Court ruling mandating certain issues to be handed over to Congress by agencies. This doctrine has been employed by multiple crypto firms, including Coinbase, as a reason to discard their respective SEC lawsuits. However, securities lawyer James Murphy tweeted on January 17 that Judge Failla did not seem entirely convinced with the concept of dismissing the case based on the high court's ruling. Contrarily, Chervinsky narrated that the judge spotted issues with SEC's case, given an amicus brief from Senator Cynthia Lummis highlighting the ongoing congressional debates on cryptocurrency regulations. This brief aligns with Coinbase's dismissal motion.
After the hearing, Judge Failla concluded that she will not be ruling on Coinbase's dismissal motion immediately. She may potentially rule a partial dismissal, discarding parts of the case while keeping others. Murphy foresaw that the judge would adjudicate the motion to dismiss within the coming three months and predicted Coinbase would ultimately triumph in the lawsuit.
Requests for comments on the matter from Coin Telegraph to the SEC remained unanswered.
Published At
1/18/2024 4:50:30 AM
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