U.S. court denies Coinbase request...securities law violation case moves forward

A U.S. federal court has denied Coinbase's request to dismiss a lawsuit filed by the U.S. Securities and Exchange Commission (SEC). The decision allows the SEC's case to proceed, alleging that the company violated securities laws and its duty to protect investors. According to CNBC, a federal court in Manhattan, New York, rejected the SEC's request to dismiss the case, which alleged that Coinbase was acting as an unregistered broker and exchange. The SEC's case against Coinbase will now move forward to discovery.

The SEC filed a lawsuit in federal court in June of last year, alleging that Coinbase engaged in securities brokerage activities without registering and avoided disclosure obligations to protect investors. It alleges that Coinbase has made billions of dollars dealing in cryptocurrencies since at least 2019, but violated securities laws by avoiding disclosure obligations to protect investors. "The term 'cryptocurrency' may be a recent invention, but the transactions at issue fit neatly within the framework that courts have used for nearly 80 years to identify securities," Manhattan Federal District Court Judge Kathryn Falk Pilar wrote in her ruling.

"The court finds that the SEC has adequately alleged that Coinbase engaged in the offer and sale of unregistered securities through its staking program." However, Pilla granted Coinbase's motion to dismiss the SEC's allegations that Coinbase acted as an unregistered broker-dealer through its cryptocurrency wallet service. Coinbase says it will defend its existing litigation with securities regulators. "We look forward to learning more about the SEC's internal views and discussions on cryptocurrency regulation," Coinbase Chief Legal Officer Paul Grewal said on social networking service X (formerly Twitter). Coinbase shares closed the day down 3.79% from the previous trading day.