The Securities and Exchange Commission (SEC) has raised questions about a previous ruling in its case against Coinbase Global, according to a recent SEC filing. The SEC is asking a federal judge to deny Coinbase’s motion to dismiss the regulator’s lawsuit against the popular cryptocurrency exchange.
The issue at hand involves Coinbase’s reliance on a court ruling that found Ripple Labs, another cryptocurrency developer, did not violate federal securities law. The SEC argues that Coinbase was incorrect in relying on this ruling and cites a later ruling in a Terraform Labs case that rejected the court’s reasoning in the Ripple case.
In the Terraform Labs case, a judge ruled that cryptocurrencies are considered securities. This ruling allowed the SEC to pursue securities charges against Terraform Labs and its founder, explicitly rejecting the approach that led to the ruling in the Ripple case.
The Ripple case had previously ruled that the blockchain company’s native XRP token is not a security when sold to the public. This ruling was seen as a victory for the broader crypto sector and for Ripple in its ongoing battle with the SEC.
The SEC filed a lawsuit against Coinbase in June, accusing the exchange of operating illegally as a national securities exchange, broker, and clearing agency without proper registration. Coinbase responded by requesting the dismissal of the case, claiming that the digital assets and services in question did not qualify as securities.
In its filing, the SEC pointed out that, apart from its Wallet application, Coinbase did not dispute its role as an exchange, broker, and clearing agency. The agency emphasized that the motion to dismiss hinges on whether Coinbase facilitated transactions involving investment contracts, which are considered securities. The SEC firmly asserted that Coinbase did indeed engage in such transactions and, therefore, should not be granted dismissal.
This recent development raises questions about the previous ruling in the Ripple case, which was seen as a victory for the crypto industry. It remains to be seen how the SEC’s arguments will be received by the federal judge reviewing Coinbase’s motion to dismiss.
Overall, this filing further highlights the ongoing regulatory challenges faced by cryptocurrency exchanges and their dealings with securities laws. The outcome of this case will likely have significant implications for the cryptocurrency industry as a whole.
