Judge May Soon Rule on Coinbase’s Motion to Dismiss SEC Crypto Lawsuit

News | January 22, 2024 By:

Cryptocurrency exchange Coinbase could learn the fate of the Securities and Exchange Commission’s lawsuit against the company in the next few months. In June 2021, the SEC sued Coinbase, alleging it operated as an unregistered securities exchange.

Last week, Coinbase asked a federal judge to dismiss the SEC’s case. However, Judge Katherine Polk Failla adjourned the proceedings without ruling on the motion. Analysts now say a decision on Coinbase’s bid to dismiss the lawsuit could come in the next three months.

If the judge does not dismiss the case, it would enter the discovery phase, where information is collected from both sides. Citi analyst Peter Christiansen noted this process could take over a year before moving to the summary judgment stage.

The judge has a few options – dismissing the case with prejudice, preventing the SEC from refiling, or dismissal without prejudice, allowing the SEC to amend its complaint. Partial dismissal is also possible.

In its defense, Coinbase argues that the tokens traded on its platform should not fall under SEC regulations as securities. Coinbase Attorney William Savitt stressed tokens purchased do not confer traditional shareholder rights like stocks. He compared buying a company’s tokens to buying Beanie Babies toys, rather than ownership in Beanie Babies Inc.

Coinbase is urging the judge to consider a prior federal ruling that cryptocurrency XRP was not a security. A decision dismissing the SEC suit could provide clarity on whether digital tokens constitute securities under US law. The case outcome will significantly impact Coinbase’s regulatory landscape going forward.

 

Source: PYMNTS