Coinbase vs. SEC, January 17th lawsuit dismissal request/hearing outlook

10 months ago 49

Hearing on request for termination of litigation

Coinbase, a major U.S. crypto-asset (virtual currency) exchange, filed a “Request for Dismissal” on January 17, U.S. time, in a legal conflict with the U.S. Securities and Exchange Commission (SEC). ) is scheduled to hold an important public hearing.

Legal experts and financial industry insiders see Coinbase’s request as unlikely to succeed and predict the fight will be long.

The SEC filed a lawsuit against Coinbase in June 2023, alleging that the company operated a brokerage business, national stock exchange, and clearinghouse in the United States since 2019 without registering with the SEC. . The lawsuit also alleges that more than a dozen assets handled by Coinbase qualify as securities, and that Coinbase violated securities laws by offering unregistered securities through its staking program.

In response, Coinbase criticized the SEC’s response as “arbitrary and capricious” and accused it of an “abuse of discretion.” The company filed a petition seeking appropriate guidance and regulation, which was denied by the SEC in December 2022. SEC Chairman Gary Gensler has made it clear that “the crypto securities market is within the scope of existing laws and regulations.”

James Murphy, a legal analyst and social media influencer, said this could be a watershed moment for Coinbase.

There are four potential court outcomes:

A judge rejects Coinbase’s “Request for Dismissal,” and the case moves on to the evidence gathering phase, similar to the Ripple lawsuit.
If the judge dismisses the entire lawsuit, the SEC is expected to appeal.
This could be a positive development for Coinbase if it forces the SEC to amend its lawsuit.
A partially favorable order to the SEC divides the focus of the case into specific issues, such as staking services and the security of the tokens.

connection:US SEC rejects Coinbase’s regulatory petition; Coinbase will appeal

Mentioning Coinbase’s profitability

Lisa Braganza, a lawyer and former head of the SEC’s Enforcement Division, said in an interview with Wall Street that the major challenge for Coinbase was to prove that the assets listed on its platform were not securities, and the SEC’s lawsuit was dismissed. He pointed out that the possibility of this happening is low.

Mizuho Securities analyst Dan Drev told Finance Feed that about a third of Coinbase’s revenue is “at risk.” Coinbase currently offers multiple services including exchange, staking, and asset storage.

Source: Mizuho Group

Coinbase also acts as a custodian for eight Bitcoin spot ETFs, and collects fees based on the funds’ total assets. However, according to Dreb, the decline in fee income due to the decline in the volume of ETF trading is greater than the custodian fee income.