SEC Lawsuit Against Coinbase Advances as Judge Rejects Most of Motion to Dismiss
Judge Katherine Polk Failla of the US District Court of the Southern District of New York ruled on March 27 that the US Securities and Exchange Commission (SEC) and Coinbase lawsuit can proceed.
The Judge’s decision came after Coinbase filed a motion to dismiss the SEC case, which borders on allegations the exchange operates as an unregistered securities exchange, broker, and clearing agency.
In her ruling, Judge Failla declared that the SEC’s lawsuit against Coinbase held “plausible” ground. The two parties were instructed to submit a case proceeding plan by April 19.
“The Court finds the SEC has 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,” the court document read.
The District Judge dismissed many of Coinbase’s arguments in the filing. She granted a partial victory to the exchange against the regulator, however, dismissing the SEC’s claims against Coinbase’s Wallet.
The judge ruled that the regulator’s claims “fails for the independent reason that the pleadings fall short of demonstrating that Coinbase acts as a “broker” by making Wallet available to customers.”
This decision by Judge Failla resulted from the SEC case against the US-based exchange in June 2023. The SEC alleged that Coinbase had allowed trading of at least 13 crypto tokens that should have been registered as securities and failed to register its crypto asset’s offer and sale “staking-as-a-service program.”
In context, the US Securities Act of 1993 defines security as financial instruments such as stocks, bonds, debentures, and investment contracts. It is designed to regulate the
