What to expect from the first Coinbase-SEC hearing

A pre-motion hearing set to unfold between the U.S. regulatory body, the Securities and Exchange Commission (SEC), and Crypto exchange Coinbase on July 13th may provide insight into the potential impacts the litigation may have on the crypto industry at large. This hearing, which had been scheduled for August before being moved, is a common request put forward by parties seeking a ruling in anticipation of a trial. Involved this time is the motion first requested by Coinbase back in late June looking for Judge Katherine Polk Faila on June 5 to make a decision. This procedural and administrative hearing will likely prove key in understanding the litigation’s tone.
Accompanying Coinbase’s request is a mention of the exchange’s public offering set for 2021. However, the SEC countered that the activities Coinbase cited in its government filings are not adequate protection against accusations the token is being traded as a security. Furthermore, the SEC went on to criticize Coinbase for “creating their own test of what constituted an investment contract”, disregarding what the Commission called “over 75 years of controlling law under Howey.”
Given the issues at hand, the verdict likely hinges on the prior public filings made by Coinbase which the SEC cleared for the exchange to go public. Chief Corporate and Securities lawyer Roland Chase weighed in on the SEC’s handling of the matter, noting that their only power when it comes to a public release was to evaluate the documents meant for potential investors and “seek to improve the company’s disclosure” if need be.  
Although a decision probably will not appear in the near future without a settlement, the case brings back memories of Ripple’s similar plight stemming from the SEC’s pronouncement that XRP was indeed a security. Worth noting was Ripple CEO Brad Garlinghouse’s statement in regards to this trial claiming the SEC’s interest, by way of their lack of clarity, “was used as a form of enforcement.”

Robert Wilson author
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