Coinbase Lawyers Challenge SEC Crypto 'Securities Transactions' Ruling in Court
Summary:
Coinbase attorneys have urged a US judge to dismiss a previous ruling that classified secondary crypto sales as "securities transactions". In a letter to US District Judge Katherine Failla, Coinbase's attorney stressed that this decision should be given no significance because it was not adequately scrutinised in court. This came after the Security and Exchange Commission's (SEC) lawsuit against former Coinbase product manager and others. The outcome saw the SEC label the crypto assets as "investment contracts", a classification contested by Coinbase in its ongoing legal battle. The firm argued that this judgement was not valid as the important issues were not properly examined in court.
Attorneys for cryptocurrency exchange Coinbase are urging a US District Judge to dismiss a prior ruling which classified secondary crypto asset sales as "securities transactions," contending that this viewpoint was not adequately scrutinized in court. In a letter dated March 5, Coinbase lawyer Michael Savitt advised Judge Katherine Failla to dismiss the SEC's prior interpretation of secondary market crypto sales in its lawsuit against Wahi - SEC vs Wahi. Savitt asserts that this ruling should be given “no seriousness.”
In 2022, the SEC initiated legal proceedings against Ishan Wahi, a former Coinbase product manager, his brother Nikhil Wahi, and their associate Sameer Ramani. They were accused of insider trading involving nine digital currencies. The defendants disputed this, asserting that the tokens did not constitute “investment contracts” and hence fell outside the scope of the SEC's jurisdiction. Coinbase and other entities supported this argument.
Despite this, before the court could render a decision, the SEC and the Wahi brothers came to a resolution in June 2023 referred to as a “zero-dollar, no-admit-no-deny” settlement. A defaulted judgment that was not contested was subsequently handed down against Ramani. Hence, the court, by default, was in agreement with the SEC's contention that the crypto assets were “investment contracts", a viewpoint that was subsequently contested in the Coinbase case.
Savitt emphasized that the verdict against Ramani, who failed to appear in court, should not be given any significance, as the critical issues were never presented or even scrutinized in court. Quickly following the SEC's attempt on March 4 to undermine Coinbase's case by drawing attention to the Wahi insider trading trial, the plea was filed.
In January, Coinbase and the SEC held a hearing to determine whether crypto assets traded on Coinbase's platform met the test established in the Howey case for being classified as securities. The SEC sued Coinbase in June 2023, alleging that the exchange violated federal securities laws by listing 13 tokens it claimed were “securities.” Coinbase is currently pushing for the lawsuit to be dismissed and is challenging the SEC's authority over cryptocurrency exchanges.
Published At
3/6/2024 9:21:00 AM
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