The SEC’s crypto lawsuit against Coinbase can continue
Illustration by Alex Castro / The VergeThe question of who gets to regulate crypto has some answers, as a judge has ruled the Securities and Exchange Commission’s securities lawsuit against Coinbase can continue. US District Judge Katherine Failla ruled...
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The question of who gets to regulate crypto has some answers, as a judge has ruled the Securities and Exchange Commission’s securities lawsuit against Coinbase can continue. US District Judge Katherine Failla ruled that under federal securities laws, “the SEC has sufficiently pleaded that Coinbase operates as an exchange, as a broker, and as a clearing agency under the federal securities laws, and, through its Staking Program, engages in the unregistered offer and sale of securities.”
While the judge ruled against most of Coinbase’s attempts to have the case dismissed, she found the SEC’s arguments “fall short of demonstrating that Coinbase acts as a ‘broker’ by making Wallet available to customers.”
Having now carefully considered the parties’ arguments, as well as the many amicus curiae submissions in this case,1 the Court concludes that because the well-pleaded allegations of the Complaint plausibly support the SEC’s claim that Coinbase operated as an unregistered intermediary of securities, Defendants’ motion must be denied in large part. As explained herein, 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. Further, the Court finds that the SEC adequately alleges that Coinbase, through its Staking Program, engaged in the unregistered offer and sale of securities.
However, the Court agrees with Defendants that they are entitled to dismissal of the claim that Coinbase acts as an unregistered broker by making its Wallet application available to customers.
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