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Pokemon Could Play a Crucial Role in Rejecting SEC's Broadened Security Definition, Alerts Coinbase CLO

Pokemon Could Play a Crucial Role in Rejecting SEC’s Broadened Security Definition, Alerts Coinbase CLO

Playing Card Games as a Counterargument

Paul Grewal, Chief Legal Officer (CLO) of Coinbase, suggests that collectibles such as Pokémon cards challenge the U.S. Securities and Exchange Commission’s (SEC) position on securities. Grewal believes that these cards are not just standalone items, but are part of a larger ecosystem that adds value, a criterion the SEC considers when determining if certain tokens are securities.

Coinbase’s Legal Battle with the SEC

Back in June, Coinbase was accused by the SEC of operating as an unregistered broker and violating securities laws. The first hearing in the case involved a crucial debate about the definition of securities, which varied between Coinbase and the SEC. While Coinbase asserts that the tokens in question are not securities due to the lack of a contractual agreement between buyers and sellers on secondary markets, the SEC introduced the concept of an ecosystem associated with these tokens to expand its understanding of the matter.

Tokens vs. Pokémon Cards

Grewal contradicts the notion that only tokens can have an ecosystem supporting their value. He highlights the example of Pokémon cards, arguing that they, too, possess an ecosystem. Grewal shared his perspective on Twitter, stating that Pokémon cards cannot be excluded from the discussion on securities simply because they have an ecosystem backing them. He finds it unreasonable to differentiate between tokens and other collectibles in this regard.

Judge’s Disapproval and Pokémon’s Ecosystem

During the initial court hearing, Judge Katherine Polk Failla voiced her skepticism about the SEC’s expanded definition of securities. She expressed concerns that broadening the definition might categorize even collectibles as securities. Grewal referenced an article titled “Into the Not-So-Wild World of Pokémon” to emphasize how Pokémon and its trading card game have grown into their own ecosystem over time. The article explains how Pokémon continues to evolve its ecosystem, adding user-friendly features to appeal to players.

Hot Take: Pokémon Cards vs. SEC’s Definition of Securities

Paul Grewal, the Chief Legal Officer of Coinbase, suggests that Pokémon cards can serve as a counterargument to the U.S. Securities and Exchange Commission’s definition of securities. As the SEC claims that an ecosystem supporting tokens is a characteristic of securities, Grewal points out that Pokémon cards also possess an ecosystem fueling their value. This challenges the SEC’s differentiation between tokens and other collectibles. During the Coinbase-SEC hearing, Judge Katherine Polk Failla shared her concerns that expanding the definition of securities might inadvertently include even collectibles. Grewal uses Pokémon as an example to illustrate how an ecosystem can develop around a particular collectible, thereby questioning the SEC’s perspective on securities.

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Pokemon Could Play a Crucial Role in Rejecting SEC's Broadened Security Definition, Alerts Coinbase CLO