Coinbase is asking the court to rule that crypto trades on its platform aren’t subject to SEC regulations. The case centers on whether digital tokens are considered securities under U.S. law.
Coinbase is seeking a court decision to clarify that cryptocurrency trades on its platform are not governed by federal securities laws. This legal action is taking place during a disagreement with the Securities and Exchange Commission (SEC), which sued Coinbase in 2023 for running as an unregistered securities exchange, according to Bloomberg.
Ruling on Crypto Trades, SEC Regulations
The main question is if digital tokens are considered securities according to U.S. law. If classified as securities, platforms like Coinbase would have to register with the SEC, resulting in tougher rules and limitations on how they operate.
The case is based on the “Howey test,” a legal guideline created by the Supreme Court in 1946 to decide if a deal is a “investment contract.” Coinbase claims that crypto transactions on its platform do not follow the Howey test.
This is because these transactions are straight sales of digital assets between anonymous buyers and sellers, without expectations of shared profits or a common business.
A federal judge in New York recently let Coinbase appeal to a higher court, which has paused the SEC case for now. Coinbase thinks fixing this problem is important for the crypto industry, which has been under more rules from the Biden administration.
During Trump’s presidency, Acting SEC Chair Mark Uyeda announced a new task group to create clearer rules for the cryptocurrency industry. This might indicate a shift away from the strict policing methods used in recent years.
