On July 7, the US Securities and Exchange Commission (SEC) issued a Presenter Letter to the judge in their case against Coinbase, in response to the exchange’s request for permission to file a motion to rule on pleadings. Here, the SEC informed the presiding judge that they have no objections to Coinbase’s proposal.
SEC vs. Coinbase Status Update
Specifically, the regulator does not want to delay the consideration of issues raised by Coinbase, which may result in the issue being resolved in due course.
The SEC outlines the arguments it plans to bring against Coinbase in the letter. However, the strength of these arguments is, as analysts expected, weak.
For example, the SEC cites the LBRY case as support for its position. However, it is important to note that the judge in that lawsuit did not conclude that the tokens traded on the secondary market are securities.
Additionally, the SEC cites a case from Connecticut that is not directly applicable because it involves a token issuer rather than a cryptocurrency exchange.
The SEC does not address the evidence of testimony from Gary Gensler that Coinbase provided in its letter. Gensler testified in May 2021 that the SEC lacks legal authority over cryptocurrency exchanges and that there is no regulatory framework for cryptocurrency exchanges within the SEC.
The SEC intends to file a motion to strike Coinbase’s defense based on the Key Questions doctrine, but the likelihood of success of such a move is extremely low.
Coinbase is expected to eventually prevail over the Key Questions Doctrine argument either at the district court level or through appeal.
During the pre-move conference on July 13, a briefing schedule is expected on Coinbase’s proposal for judgment on the pleadings.
Blow to the Securities and Exchange Commission?
The SEC’s latest letter could be seen as a setback for them, but it’s not a huge hurdle to overcome. While there are some arguments that can be made against Coinbase, they are not particularly strong.
Coinbase can see the SEC’s decision not to oppose their proposal to rule on pleadings as a positive development.
The case may be resolved more quickly, which is beneficial for Coinbase.
(embed) https://www.youtube.com/watch?v=Q8fWRB4HU54 (/embed)
In early June, the Securities and Exchange Commission lawsuit Coinbase and Binance, two of the largest cryptocurrency exchanges in the world, to facilitate what the regulator claims is the trading of unregistered cryptocurrency securities.
In response, Coinbase said it would vigorously defend itself in court.