The Securities and Exchange Commission can move forward with its lawsuit against Coinbase, U.S. District Judge Katherine Polk Failla said Wednesday.
The SEC “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 wrote.
“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,” she wrote.
Failla dismissed, however, the SEC’s claim that Coinbase Wallet is an unregistered broker, saying the commission’s arguments “fall short.”
The SEC sued Coinbase last June, three months after informing the company through a Wells notice that an enforcement action was likely on the way.
The crypto exchange asked the judge to dismiss the lawsuit in August. Citing a separate ruling involving Ripple, Coinbase’s chief legal officer, Paul Grewal, said the SEC “has trampled the strict boundaries on its basic authority.” The SEC and Coinbase first met in court in January.
The Ripple case, which landed partial wins for both the regulator and the crypto exchange, saw a development this week when the SEC filed a brief with the court claiming Ripple should pay $2 billion in penalties for selling its token, XRP, to institutional investors. Ripple is set to file a reply next month.
In response to Failla’s Wednesday ruling, Grewal wrote in a post on social media site X that he wasn’t surprised.
“Early motions like ours against a government agency are almost always denied,” he said. “But clarity is the ultimate goal and today’s decision continues us on that path.
“While we continue this process, and any necessary appeals, we encourage Congress to build on the momentum we saw last year to advance comprehensive digital assets legislation in the US,” he wrote. “This is critical if we want innovation to remain in the US.”
