Coinbase reported this morning that SEC agreed to dismiss its suit against the cryptocurrency exchange.
Coinbase announced in a recent blog and regulatory filing that it has been able to secure a new customer. “reached an agreement in principle” The complaint will be dismissed with prejudice if the SEC’s staff agrees. In the filing it was stated that SEC commissioner approval is needed for this agreement.
The SEC has two commissioners currently in office: Mark Uyeda (who is the acting chair) and Hester Pettice.
In 2023, Uyeda Peirce issued a joint statement disapproving of the decision by the commission to reject Coinbase’s rulemaking petition. It is a different case from what Coinbase says will be thrown away. Coinbase has a lot of legal expenses, and we haven’t been envious.
I’m expecting that, given their documented distaste of the SEC’s track record in enforcement actions under Genser as chair, they will both sign off on what the SEC staff have apparently agreed with Coinbase.
The SEC has not yet filed a motion for dismissal of the case in the SDNY, where the original complaint was filed, or the Second District which is responsible for ruling on Coinbase’s interlocutory appel.
On Monday, we reported that the SEC has filed for a second district extension. This filing mentions the SEC’s new “crypto task force,” This may be helpful “facilitate the potential resolution” The litigation.
In 2023, the lawsuit was filed and Coinbase was accused of violating securities laws for selling securities that were not registered. 13 unregistered security tokens to be precise. The suit named solana, filecoin and other tokens.
Last year, Coinbase tried to have the case dismissed. Although the attempt was largely unsuccessful, the judge agreed to throw out allegations about Coinbase’s wallet services which were alleged by the SEC as acting like an unregistered brokerage.
Coinbase then filed a motion for interlocutory review. A judge granted permission to the exchange to have a superior court decide on an important question.
Second Circuit will now have to decide (at least until this case is dismissed) whether crypto transactions that involve intermediaries are investment contracts. In the event that you answer yes to this question, it means that crypto exchanges will be involved in securities transactions.
Coinbase was hailed as a big winner when they elevated a portion of this case from the Second District. District court rulings aren’t very precedent setting, not even in the Southern District. The same judges within the district may reach different conclusions as we have seen in Terraform and Ripple.
An appellate level decision holds more weight. Such a ruling could be useful if the SEC were to later sue a crypto exchange.
This is all probably moot. The industry will not be able to appeal the decision, and this was a major disappointment at one time. The industry would have been disappointed if there had not been an appellate ruling. “new” Is it really necessary to clarify that the SEC does not pursue such types of enforcement action against crypto?
Unfortunately, not at the moment. But nothing — especially not agency leadership and presidential terms — lasts forever.
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