A federal judge has ruled that the Securities and Exchange Commission can move forward with its lawsuit against cryptocurrency exchange Coinbase, CNBC reports.
U.S. District Judge Katherine Polk Failla decided that the SEC’s case against the company can be heard by a jury at trial.
In its complaint filed in June, the SEC sued Coinbase for offering unregistered securities, alleging that the company was acting as an unregistered broker and exchange. The suit claimed that Coinbase has made billions of dollars since at least 2019 by operating as an intermediary on crypto transactions through its staking program, while evading disclosure requirements meant to protect investors.
The SEC said Coinbase traded at least 13 crypto assets that are securities that should have been registered, including tokens such as Solana, Cardano and Polygon.
In her 84-page ruling, Judge Failla denied a motion by Coinbase to dismiss the lawsuit, writing that “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.”
She added, “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.”
But the judge also agreed to dismiss the SEC’s claim that Coinbase acted as an unregistered broker through its Wallet application, writing that the commission’s arguments “fall short of demonstrating that Coinbase acts as a ‘broker’ by making Wallet available to customers.”
Responding to the ruling, Coinbase’s chief legal officer Paul Grewal said, “We were prepared for this, and we look forward to uncovering more about the SEC’s internal views and discussions on crypto regulation.”. Coinbase had contended that the SEC overstepped its authority granted by Congress, while claiming that its tokens were not securities and that securities laws do not apply to these digital assets.
Judge Failla set an April 19 deadline for both sides to agree on a plan for scheduling the case.
The SEC has also filed suit against another major cryptocurrency exchange, Binance, alleging that the company has made multiple unregistered offers and sales of crypto asset securities.
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