Coinbase to Meet SEC in Court This Week, Here’s What to Expect

This week, crypto exchange Coinbase will meet the US Securities and Exchange Commission (SEC) in court, over the ongoing lawsuit. The SEC slapped a lawsuit on Coinbase last month for operating as an unregistered securities exchange.

However, Coinbase has said that the accusations by the SEC are false and has decided to take matters to court. Some crypto community participants believe that the case might continue to drag on for years if both parties don’t settle, as we saw in the case of Ripple.

Even since the federal securities regulator slapped a lawsuit on Coinbase last month, both parties will be meeting for the first time in court this Thursday, July 13. From the questions that Judge Katherine Polk Faila asks and the responses from the attorneys for the SEC and Coinbase, we can get an idea of the important issues that will be highlighted at the beginning of this legal battle.

Coinbase Demands Regulatory Clarity

Crypto exchange Coinbase has been demanding clarity on crypto regulatory matters and thus has been engaging with the federal securities regulator over the past few months. Coinbase was quick to respond to the Wells Notice by the SEC staff earlier this year, asking for further regulatory clarity.

In its initial response to the SEC, Coinbase claimed that the SEC was infringing on its due process rights and attempting to take action ahead of Congress by filing a lawsuit. Coinbase further argued that the allegations against it should not be applicable to its operations. The crypto exchange noted:

“Like all securities, an economic arrangement can qualify as an investment contract only if it involves an ongoing business enterprise whose management owes enforceable obligations to investors. Absent such obligations, the contract is just an asset sale.

Because no such obligations are carried in the transactions over Coinbase’s secondary market exchange, and because the value that Coinbase purchasers receive through these transactions inheres in the things bought and traded rather than in the businesses that generated them, the transactions are not securities transactions.”

However, the SEC isn’t convinced with this response adding that “Coinbase attempts to construct its own test for what constitutes an investment contract”. The filing responded to various aspects of Coinbase’s arguments, including Coinbase’s claim that the SEC had the opportunity to assess its operations during the company’s pre-public review. The regulator believes that the lawsuit is justified and highlighted Coinbase’s public statements acknowledging the potential for legal action as evidence.