A court ruling allows the US Securities and Exchange Commission to proceed with its lawsuit against Coinbase.
A US judge has permitted SEC claims asserting that Coinbase neglected to register as a securities business, according to a court ruling. However, the judge dismissed SEC’s claim alleging that Coinbase acted as an unregistered broker through its wallet application, as per the ruling.
On Wednesday, Judge Katherine Polk Failla from the U.S. District Court for the Southern District of New York mostly denied Coinbase’s motion to dismiss the SEC lawsuit, stating that the regulatory agency presented a “plausible” case against the exchange. She established an April 19 deadline for the parties to reach an agreement on a case scheduling plan.
Last year, the SEC filed a lawsuit against Coinbase, coinciding with its lawsuit against fellow exchange Binance. The lawsuit accused Coinbase of violating federal securities laws by providing trading and staking services to the general public. Additionally, it contended that Coinbase Wallet operated as an unregistered brokerage.
Although the judge acknowledged the SEC’s argument that certain tokens listed on Wallet could potentially qualify as “investment contracts,” she found no evidence that Coinbase was operating as a brokerage, thus dismissing that aspect of the lawsuit.
She ruled that the other parts of the lawsuit can move forward, dismissing allegations that the SEC violated the Major Questions Doctrine (a U.S. Supreme Court ruling preventing federal agencies from surpassing their congressional mandates) or the Administrative Procedures Act. The judge emphasized that Coinbase had sufficient prior notice that the SEC was pursuing legal actions against cryptocurrency companies, citing the DAO Report and past cases.
Coinbase CEO Brian Armstrong highlights a significant win in the SEC case and underscores it as a major victory for self-custodial wallets.
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