1 of 2 | Employees and supporters of Coinbase pop the corks on bottles of champagne at the NASDAQ MarketSite where the Coinbase logo is displayed on screens in Times Square when Coinbase Global beings trading under the symbol COIN on April 14, 2021. File Photo by John Angelillo/UPI |
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March 27 (UPI) -- The Securities and Exchange Commission can proceed with a jury trial in its federal lawsuit accusing cryptocurrency Coinbase of illegally selling securities, a federal judge ruled Wednesday.
U.S. District of Southern New York Judge Katherine Polk Failla on Wednesday allowed the case to continue after Coinbase attorneys moved to dismiss it. Failla said the SEC has a plausible case and gave the litigants until April 19 to agree on a scheduling plan for the lawsuit, CNBC, Axios and CoinDesk reported.
"The court decided that our SEC case will move forward on most of the claims but dismissed the claims against Coinbase wallet," Coinbase chief legal officer Paul Grewal posted on X. "We were prepared for this, and we look forward to uncovering more about the SEC's internal views and discussions on crypto regulation."
The SEC says Coinbase officials engage in unregistered securities sales by acting as a broker and an exchange while conducting cryptocurrency transactions. The SEC considers cryptocurrencies to be a type of security and regulates it in the same manner as it does securities traded on stock exchanges.
"When intermediaries don't register, it's investors who get hurt and the American financial markets that suffer," the SEC said in a statement to Axios. "We will continue to protect investors against risks in the crypto markets when ... the securities laws are implicated."
Failla said the SEC sufficiently accuses Coinbase of violating federal laws banning the unregistered offer and sale of securities through its staking program for the case to proceed.
Coinbase says its staking program enables people to earn cryptocurrency as rewards for "helping strengthen the security of the blockchain network." Coinbase charges a commission on all such rewards but says participants have full ownership of their staked cryptocurrencies.
Failla granted one request by Coinbase officials when she dismissed the SEC's claim that a wallet application provided to its customers makes Coinbase an unregistered broker.
Coinbase has partnered with several exchange-traded funds to take custody of spot funds, which are among those that have accrued about $52 billion in investments since January.
SEC chair Gary Gensler in June told CNBC exchanges like Coinbase operate like a hedge fund and have many functions that lead to potential violations of federal financial laws.
