Hi! You've probably heard that battles often take place in the world of cryptocurrencies and law. So, one of the most famous crypto exchanges, Coinbase, has just won an important victory over the U.S. Securities and Exchange Commission (SEC). Let's look at what happened and why it's so important.
What happened?
The SEC has been suing Coinbase since 2023, claiming that the platform trades tokens that are legally securities. This means that they should have been registered with the SEC. Coinbase, of course, does not agree. They believe that digital assets on their platform do not fit the definition of securities.
On January 7, District Judge Catherine Polk Filla suspended the proceedings in the case so that Coinbase could appeal to the court of Appeals. The purpose of the appeal is to clarify which tokens can really be considered securities, based on the old Howe test.
What is the Howie test?
It is a legal instrument that determines whether something is a security. According to it, an asset is considered a security if it is assumed:
Investing money.
The promise of profit.
A joint venture where success depends on the efforts of the other party.
Coinbase says: the tokens on their platform do not meet this test, as the issuers of the tokens (those who issue them) are not required to provide buyers with any guarantees or profits. The judge agreed that this issue is important and needs to be resolved at the level of the Court of Appeal.
Why is this a win for Coinbase?
A pause in the trial. The proceedings in the district court are frozen until the appeal reaches its verdict.
An opportunity to set a precedent. If Coinbase wins the appeal, it will become a legal guideline for the entire crypto industry.
Paul Grewal, Coinbase's chief legal officer, expressed confidence in his arguments. Now the case will be considered in the second instance.
What does this mean for cryptocurrencies?
If the court sides with Coinbase, it will create protection for other exchanges and crypto companies. This will provide clarity on how to proceed so as not to violate US laws. But this is not the only problem for the industry.
Problems of the crypto market with regulators
The SEC, under the leadership of Gary Gensler, is firmly targeting the crypto industry. Gensler believes that most tokens on exchanges are unregistered securities. He has already filed several lawsuits against crypto companies.
But things can change. The new US administration (possibly under Donald Trump) is planning to change the leadership of the SEC. If Paul Atkins, known for his softer approach, heads the commission, the pressure on crypto companies may decrease.
Coinbase's Successes on Another Front
In addition to the court victories, Coinbase received a license from the New York authorities. Now the exchange can launch new products for residents of the state. This is an important step, especially as other regions are tightening the rules for cryptocurrencies.
Coinbase has also publicly criticized the alleged "Chokepoint 2.0 operation." This is an initiative in which banks allegedly restrict cooperation with crypto companies. Senator Cynthia Lummis also supported this criticism, saying it violates market rights.
The Future of the Crypto Industry
Meanwhile, Congress is debating new laws that could create clear rules for digital assets. If such regulation appears, the courts may lose their importance in these matters.
But for now, we're waiting to see how the Coinbase case ends. Their victory in the court of appeal could be a turning point for the entire industry.
If Coinbase continues to win, it will show that cryptocurrency companies can successfully defend their rights even in such a harsh legal environment. This is an important moment that may affect how the crypto market will develop in the United States and around the world.