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A federal judge in New York has ruled on a significant pretrial motion in the U.S. Securities and Exchange Commission’s lawsuit against the cryptocurrency exchange Coinbase. The legal proceedings are being closely monitored by the digital asset industry as they could set important precedents regarding the application of securities law to cryptocurrencies.

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Judge Katherine Polk Failla of the Southern District of New York has denied a large portion of Coinbase’s motion to dismiss the SEC’s lawsuit. The ruling allows the majority of the regulatory agency’s claims to proceed to trial.

The SEC’s lawsuit, filed in June 2023, alleges that Coinbase operated as an unregistered national securities exchange, broker, and clearing agency. The regulator also contends that the staking-as-a-service program offered by Coinbase involves unregistered securities.

The court’s decision means the SEC’s core arguments that certain crypto assets traded on Coinbase are investment contracts, and thus securities, will be tested in court. The judge did dismiss the SEC’s claim that Coinbase acted as an unregistered broker by making its digital wallet service available to users.

Summary

A U.S. district court has largely rejected Coinbase’s attempt to throw out the SEC’s lawsuit against it. The case will now move forward on the primary allegations that Coinbase facilitated the trading of unregistered securities.

The SEC’s case focuses on Coinbase’s core business operations as an exchange and its staking reward program. The court found the SEC’s arguments sufficiently plausible to warrant a full trial.

One part of the SEC’s complaint, regarding Coinbase’s wallet service, was dismissed. The main legal battle over whether certain cryptocurrencies are securities will be decided in the ongoing litigation.

FAQs

What is the SEC suing Coinbase for?
The SEC alleges Coinbase operated its trading platform as an unregistered national securities exchange, broker, and clearing agency. It also claims the company’s staking service involves unregistered securities.

What was the result of the recent court ruling?
The judge denied most of Coinbase’s motion to dismiss the case. This allows the SEC’s main claims to proceed to trial while dismissing one claim related to Coinbase’s wallet service.

What happens next in the case?
The lawsuit will now enter the discovery phase, where both sides gather evidence. A trial date will likely be set to determine the final outcome of the allegations.

Disclaimer: This report is for informational purposes only and does not constitute financial advice. All information is based on verified reporting available at the time of publication.