New York Judge Questions Coinbase on Token Securities
New York District Judge Katherine Polk Failla interrogated Coinbase in court regarding whether the tokens listed on its exchange should be classified as securities. Coinbase is currently facing a lawsuit filed by the Securities and Exchange Commission (SEC) for allegedly operating as an unregistered exchange, broker, and clearing agency. The cryptocurrency exchange has argued for the dismissal of the case and accused the regulator of using a “regulation by enforcement approach.”
Coinbase Lawyer Defines Securities
Coinbase’s lawyer, William Savitt, discussed how securities are defined, highlighting the distinction between “investing in Beanie Baby Inc. and buying Beanie Babies.” He stated that Coinbase does not claim that all tokens listed on its platform cannot be considered securities. However, he pointed out that the SEC failed to provide any allegations in its lawsuit that meet the definition of an investment contract.
Debate Over Bitcoin’s Security Status
The SEC and Coinbase attorneys clashed over whether bitcoin should be classified as a security. The SEC argued that bitcoin is not a security because it lacks an ecosystem behind it. In response, Coinbase’s Savitt emphasized that bitcoin does indeed have an ecosystem like any other cryptocurrency.
Relevant Court Decisions and Major Questions Doctrine
Judge Failla questioned Coinbase’s lawyer about previous court decisions related to securities and cryptocurrencies. She also discussed the major questions doctrine invoked by Coinbase, expressing her hesitation to implicate it due to its infrequent usage in court cases.
Hot Take: Judge Failla Delays Decision on Coinbase vs. SEC Case
Judge Failla concluded the hearing without making a final decision. If she denies Coinbase’s motion to dismiss the case, it will proceed to discovery. Both parties may then bring a motion for summary judgment. If the judge remains unconvinced, the case will go to trial and be presented to a jury, likely not until 2025.
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