In a pivotal moment for the cryptocurrency industry's legal landscape, the court overseeing the dispute between Coinbase and the U.S. Securities and Exchange Commission (SEC) has issued a significant ruling, with implications reverberating throughout the sector.
The court ruled against Coinbase, affirming the SEC's claims that the platform functioned as an exchange, broker, and clearing agency. However, the court also partially sided with Coinbase concerning certain SEC claims related to its wallet system, allowing the case to proceed, marking a critical juncture in the ongoing legal confrontation.
The SEC alleged that Coinbase facilitated transactions in crypto-asset securities without proper registration, violating several provisions of the Exchange Act. The court denied Coinbase's motion to dismiss these claims, supporting the SEC's assertions that the platform acted as a marketplace for crypto-asset securities and as a custodian through its wallet system.
Furthermore, the court held Coinbase's parent company, CGI, potentially liable as a control person under the Exchange Act, rejecting Coinbase's motion to dismiss this claim.
The court agreed with the SEC's argument that Coinbase's Staking Program constituted an investment contract subject to registration under the Securities Act. However, it granted Coinbase's motion concerning claims related to its Wallet application, finding insufficient evidence to support allegations of unregistered brokerage activity.
Both parties are directed to submit a proposed case management plan by April 19, 2024.
Edward Snowden commented on the potential implications, suggesting that continued bad faith actions by the SEC could lead to unfavorable outcomes in court, drawing parallels to previous incidents involving Bitcoin ETF approvals.
The daily chart shows COIN stock’s drop following the court’s ruling. Source:COIN on TradingView.com
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