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Cryptocurrency exchange heavyweight, Coinbase challenges the authority of SEC’s Authority. The exchange filed a motion to dismiss the U.S. Securities and Exchange Commission’s (SEC) case, believing the regulatory authority has overstepped its bounds.
The ongoing legal battle explores the murky waters surrounding cryptocurrency regulation and highlights the disagreements between leading industry players and government agencies at a crucial juncture in the rise of digital assets.
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The Genesis of the Coinbase Challenge
In June, the SEC initiated legal action against Coinbase, accusing the platform of violating securities laws by failing to register as a securities exchange, broker, or clearing agency. The SEC argued that most of the cryptocurrencies on the Coinbase are securities. As such, Coinbase should have registered as a Securities Exchange before offering its services to Americans.
The SEC has used the Howey Test, a legal precedent established in a 1946 U.S. Supreme Court case involving citrus groves, to determine whether specific transactions qualify as investment contracts subject to securities laws.
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Coinbase Challenges SEC Authority
Notably, Coinbase argues that the SEC has stretched the application of the Howey Test “beyond recognition.”
Central to Coinbase’s challenge of the SEC’s case is the definition of securities and investment contracts. The company posits that the SEC’s authority should be limited to securities transactions, which involve contractual claims tied to a business enterprise’s future income, profits, or assets.
According to Coinbase, the SEC’s stance implies that investment contracts could exist whenever an individual expects their purchase will appreciate in value or when they invest capital. This perspective, if upheld, could lead to far-reaching consequences for the entire cryptocurrency industry.
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Introducing Judge Failla
At this point, it is important to introduce the judge who’s presiding over this case, Judge Katherine Polk Failla. She recently dismissed a similar case against Uniswap. Crypto enthusiasts will expect the Coinbase challenge to go in pretty much the same way as the Uniswap case. It’ll be interesting to see how things pan out, though.
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Disclaimer:
Please note that this article serves solely for informational purposes. As such, it is not financial advice. We strongly advise readers to conduct thorough research and consult with financial professionals before making any investment decisions.
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