- Unless the parties reach a settlement, the case will drag on for years
- Coinbase finds that the accusations do not apply to its operations
Coinbase and the US Securities and Exchange Commission (SEC) will meet in court this week, Bankless Times learned from State of Crypto, a CoinDesk newsletter reviewing the intersection of cryptocurrency and regulations.
Why is the case important?
Unless the parties reach a settlement, the case can drag on for years. To compare, the case of SEC vs. Ripple has been going on for almost three years.
Coinbase and the SEC are due to meet in court on Thursday this year. It will be the first meeting in the federal watchdog’s lawsuit against the leading US crypto exchange.
SEC sued Coinbase in June, multiple accusations
The SEC sued Coinbase in early June this year. The regulator argued that Coinbase processed orders, solicited customers, acted as a middleman, and accepted bids all at once. According to SEC Chair Gary Gensler, the exchange deprived investors of regulations preventing fraud and manipulation, violated disclosure rules, and made “routine inspection by the SEC" impossible.
The SEC also identified Cardano, Solana, Polygon, Filecoin, Sandbox, Axie Infinity, Near, Chiliz, Flow, Dash, Internet Computer, Voyager, and Nexo as securities in the lawsuit. All of these cryptos are available on Coinbase's Wallet or Prime services.
Wells Notice suspended Coinbase’s Lend program
Coinbase has been open about the impending lawsuit ever since it received a Wells Notice from SEC. The notice expressed the regulator’s intentions to sue Coinbase for letting its customers earn interest by lending digital assets through its Lend program. At the time, Coinbase shares tanked on the news, and Lend was suspended.
According to the crypto exchange, the accusations do not apply to its operations. Coinbase stated:
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.
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