What to Expect from the First Coinbase-SEC Hearing

Legal sources told Cointelegraph that a pre-motion hearing between the Securities and Exchange Commission (SEC) and crypto exchange Coinbase scheduled for July 13 should inform the tone of the litigation and its potential effects on the broader crypto industry.

Scheduled for the first of August, the conference is a specific request submitted by either party to decide on a specific matter prior to trial. In this case, the proposal was requested by Coinbase in late June. The exchange wants Judge Catherine Polk Fella to dismiss the complaint filed by the regulator on June 5.

As the first hearing between the parties, the conference will likely be “procedurally and administratively burdensome,” explained securities and regulatory attorney Mark Kornfield. Kornfield added, “Coinbase will attempt to establish a fit case for an early dismissal of this matter on any grounds, including that tokens are not securities under the Howe test and thus the Commission is within its jurisdiction.” overtaking.”

In its response to the motion on July 7, the SEC strongly criticized the exchange, including that it was aware of potential violations of securities laws, and that it was attempting to “bring about more than 75 years of deregulation law under Howe.” discussing “ignore”. “Designing Your Own Test for What Constitutes an Investment Contract.”

Coinbase’s proposal also refers to its initial public offering in 2021. According to the exchange, the SEC is now seeking fees for activities it “detailedly described” to regulators and the general public over the past year.

Although the SEC was aware of Coinbase’s business activities, the claim may not have been enough to win the case in court. According to corporate and securities attorney Roland Chase, the federal securities laws governing the process of “going public” are disclosure-based. “Some of what the SEC has been authorized by Congress to do is review ongoing public documents and provide comments and ask questions in an effort to improve company disclosures to potential investors,” Chase told Cointelegraph. ”

Chase also noted that in going public, Coinbase informed the SEC that it would subject each asset to an extensive legal analysis before allowing it to trade on its platform to ensure that securities were not traded. is done. “The SEC eventually became comfortable with all of this disclosure and approved Coinbase to go public,” he explained. He further added that the SEC “now believes that Coinbase is in fact trading securities on its platform. In addition, it believes that Coinbase is offering its own unregistered securities.”

Without an agreement between the parties, the case could take years to resolve. A famous example is Ripple’s legal battle which has been going on since 2020 when the SEC also held that its token XRP was a security. In a recent video about the ongoing lawsuit, Ripple CEO Brad Garlinghouse said the SEC “intentionally created confusion about the rules, and they used that confusion through enforcement.”

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