David Edwards
Experts are skeptical about a swift resolution to Coinbase’s legal tussle with the U.S. Securities and Exchange Commission (SEC), pointing to the difficulty of proving that the tokens listed are not securities.
According to the Wall Street Journal, Coinbase’s request for dismissal, slated for January 17, is viewed as a long shot by legal and financial insiders. Lisa Bragança, a lawyer and former SEC enforcement branch chief, expressed doubt that the case would be dismissed, citing the substantial challenge Coinbase faces in proving that the assets listed on its platform are not securities.
“Coinbase is claiming that the types of coins it lists on its platform are not securities, and proving that is going to be very challenging.” – Lisa Bragança
In a related development, Mizuho Securities analyst Dan Dolev highlighted that almost a third of Coinbase’s revenue is “at stake,” as an adverse outcome could lead to a separation of its services. Currently, Coinbase provides various services such as trading, staking, and asset custody, in addition to acting as the custodian for eight spot Bitcoin exchange-traded funds (ETFs) with fees based on the total value of the funds’ assets.
In June 2023, the SEC filed a lawsuit against Coinbase, alleging that the cryptocurrency exchange had operated in the U.S. without registering as a broker, national securities exchange, and clearing agency since 2019. The SEC contends that many of the assets listed on the exchange are considered securities.
In response, Coinbase’s Chief Legal Officer, Paul Grewal, criticized the SEC’s decision to sue the exchange as “arbitrary and capricious” and an “abuse of discretion.” Despite several attempts by Coinbase to urge U.S. courts to establish clear rules for the crypto industry, SEC Chair Gary Gensler remains steadfast in asserting that “existing laws and regulations apply to the crypto securities markets.”
