- Judge Katherine Polk Falia has ruled on Coinbase’s motions to dismiss the SEC case against it.
- The ruling was not what many in the crypto industry expected.
- Experts have, however, downplayed the impact of the ruling.
After months of anticipation, Judge Katherine Polk Falia has finally entered her ruling on Coinbase‘s motions to dismiss the SEC case against it. The ruling, however, was not what many in the crypto space had hoped for.
Following months of deliberation, Judge Falia sided with the SEC on all but one claim, setting the stage for the case to head to trial.
How impactful is the ruling in this case that could help shape the future of the crypto industry in the U.S.?
Coinbase Motion to Dismiss Largely Denied
In a decision filed on Wednesday, March 27, Judge Falia denied Coinbase’s motion to dismiss the SEC case against it “in large part,” contending that the federal markets regulator had made a “plausible” case against the exchange for allegedly facilitating the trading of unregistered securities.
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"As explained herein, the 'crypto' nomenclature may be of recent vintage, but the challenged transactions fall comfortably within the framework that courts have used to identify securities for nearly eighty years," she wrote.
Judge Falia extended the same view to Coinbase’s staking service. The judge cited customers’ dependence on the exchange’s “managerial efforts” in arguments for why the service could fall under the Howey definition of an investment contract.
Nonetheless, it was not a landslide win for the SEC, as Judge Falia sided with Coinbase on one claim. Contrary to the agency’s complaint, the judge found that the exchange had not operated as an unregistered broker through its wallet service.
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Despite market jitters in response to the ruling, experts have downplayed its impact.
Coinbase Dismissal Loss Par for the Course?
Responding to the ruling, Coinbase Chief Legal Officer Paul Grewal suggested that the outcome was largely expected.
"Early motions like ours against a government agency are almost always denied. But clarity is the ultimate goal and today's decision continues us on that path," the attorney wrote in a six-part X post.
According to Grewal, the exchange remains confident in its arguments and embraces the opportunity to prove them in court.
The Coinbase CLO was not the only one to dismiss the impact of the recent ruling on the case. Chiming in, Brown Rudnick Partner Stephen Palley described the ruling as “work-a-day procedural stuff.”
Variant Fund Chief Legal Officer Jake Chervinsky described the ruling as “disappointing,” highlighting the optimism that had followed oral arguments in January 2024. Nonetheless, the lawyer surmised, “it’s only the beginning — not the end — of the SEC’s case against Coinbase.”
Judge Falia set a deadline of April 19 for Coinbase and the SEC to develop a case scheduling plan.
On the Flipside
- Many in the crypto industry have hailed the court ruling that Coinbase does not offer an unregistered brokerage service through its wallet as a win for DeFi.
- With the case going to trial, a jury will decide Coinbase’s fate, not the judge.
Why This Matters
The recent ruling in the SEC case against Coinbase has caused significant concern in the crypto space, with some crypto asset prices sliding in response. Experts, however, suggest that this concern is not warranted.
Read this for more on the SEC case against Coinbase:
How the Coinbase vs SEC Showdown Could Alter “Securities”
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