Cryptocurrency exchange Coinbase has filed a motion to dismiss the lawsuit brought against it by the US Securities and Exchange Commission (SEC).
Coinbase argues that the tokens it offers are not securities or investment contracts. On January 17, 2024, the first hearing took place regarding the SEC's civil suit against Coinbase.
SEC v @coinbase Update IV
— MetaLawMan (@MetaLawMan) January 17, 2024
In an unusual move, the Judge dispensed with any prepared arguments from either side and instead went straight to questioning the lawyers.
The first 2 hours was spent exclusively questioning of the SEC lawyers.
The SEC lawyers were better prepared…
The SEC accused the platform of engaging in brokerage, dealing, and clearing activities without the necessary license.
Both Coinbase and the SEC have requested an early verdict. However, Judge Catherine Polk Failla stated that she was not ready to make a final decision at this time.
The SEC claims that purchasing tokens is equivalent to gaining access to an entire ecosystem with the intention of making a profit. The Commission argues that these transactions should be considered investment contracts, thus alleging that Coinbase is in violation of the Securities Act.
Coinbase's lawyer, William Savitt, countered this argument by highlighting the distinction between investing in a company and purchasing tokens issued by that company.
While Coinbase did not explicitly state that tokens cannot be considered investment contracts, the exchange pointed out that the SEC has not provided any evidence to support this claim.
Savitt emphasized that for an investment contract to exist, there must be a specific promise of profit. According to him, Coinbase has not made such promises, and therefore, the sale of tokens on the secondary market should not be considered the realization of investment contracts.
During the hearing, the #SEC lawyers used bitcoin as an example to support their argument. They claimed that bitcoin is not considered a security because it lacks the ecosystem that the regulator deems necessary for an "enterprise."
Savitt refuted this claim and argued that, following the SEC's logic, most tokens would not qualify as securities.
The hearing lasted for five hours, and Judge Polk Failla stated that she would make a decision regarding the continuation of the case in the near future. A lawyer and crypto-enthusiast, known as MetaLawMan, who attended the trial, compared the case's progression to that of #Ripple Labs.
SEC v. @Coinbase Update V (last)
— MetaLawMan (@MetaLawMan) January 17, 2024
The long awaited hearing is over.
As expected, there was no ruling from the Judge.
There were no knockout blows delivered by either side and, frankly, not a lot of high points over the course of the 5 hour hearing.
The Judge was the star of…
It is worth noting that Ripple Labs eventually achieved a partial victory, with the court ruling that the sale of #XRP tokens on the secondary market did not violate securities laws.
MetaLawMan is confident that the judge will allow the case to proceed, but ultimately, #Coinbase will emerge victorious. He predicts that Judge Polk Failla will issue a ruling within the next three months.
