U.S. District Judge Katherine Polk Failla has rejected Coinbase’s request to dismiss the lawsuit filed by the SEC last year. In a significant ruling, the judge denied most of Coinbase’s motion to dismiss the charges brought against them by the SEC. The court determined that the securities agency had a valid argument against the San Francisco-based exchange.
According to Judge Failla, the SEC adequately demonstrated that Coinbase operated as an unregistered broker, exchange, and clearinghouse under U.S. federal securities law. The judge also concluded that Coinbase facilitated the trading of unregistered securities through its staking program. However, the court did dismiss the SEC’s allegation against Coinbase Wallet, giving the exchange a partial victory.
Following this ruling, the SEC’s lawsuit against Coinbase will proceed to discovery, and experts in the crypto industry believe that the exchange could face a legal battle similar to Ripple’s. Prominent crypto lawyers, including Bill Morgan, have suggested that Coinbase may endure a three-and-a-half-year ordeal like Ripple did when facing the SEC.
In December 2020, the SEC charged Ripple with violating federal securities laws through the sale of XRP, which it classified as a security. Similarly to Coinbase, Judge Analisa Torres denied Ripple’s motion to dismiss the SEC’s charges in the early stages of the lawsuit. Although Ripple’s initial motion was dismissed, the company achieved a significant victory against the regulatory agency in the summary judgment.
After years of arguments, the court concluded that Ripple did not violate the law by selling XRP on digital exchanges and ruled in favor of Ripple on the issue of other distributions. However, the court sided with the SEC regarding Ripple’s past XRP sales to institutions. The Ripple lawsuit has already gone through the discovery and summary judgment phases and has been ongoing for over three years.
Coinbase’s case is now entering the remedies phase, and the SEC has submitted an opening brief for the proceedings. Ripple will have until April 22 to submit its opposition to the brief, and the SEC will have an opportunity to file a reply by May 6.
Crypto enthusiasts anticipated that the SEC’s lawsuit against Coinbase would progress to the discovery phase. Pro-crypto journalist Eleanor Terrett expressed her lack of surprise, stating that it would have been unexpected if Judge Failla had not found at least one valid argument among the charges against Coinbase. Terrett believes Coinbase will now have the opportunity to present its case in court, just as Ripple did.
Please note that this article is for informational purposes only and should not be taken as financial advice. The opinions expressed are those of the author and do not necessarily reflect the views of The Crypto Basic. Readers should conduct their own research before making any investment decisions, and The Crypto Basic is not liable for any financial losses incurred.