Topic: Coinbase vs SEC (Read 307 times)

Yes I am aware of the totality of the judge's decision. However, and I am only saying, that it is very important for us not to be confused on what the judge's ruling on XRP really implies. The ruling states clearly that XRP as a digital token is not in and of itself a contract, a transaction or a scheme that embodies the howey test requirements of an investment contract.

This is the part of the case where all of the other cryptocoin and token projects can use as precedent when they begin fighting for their own legal battles.

In next coming months, I reckon that we should not get distracted and be influenced by legal terms or specific details of the case that might leave us more confused. The ruling on XRP has already been made very clearly.

On how Ripple's case ends after the SEC's appeal, I do not care. I am only talking about the present ruling on XRP. It is not a security.

The SEC doesn't know where it's standing. It classified most cryptocurrencies as securities, even though it allowed Coinbase to go public with Nasdaq. There needs to be regulatory clarity in the US, or there will be serious consequences in the long run. I wouldn't declare victory in XRP's case against the SEC, especially with the Biden administration's tough crypto regulations. It's most likely the SEC will appeal the court decision with the hopes of turning the tide.

Unless we're certain the US will revise its crypto regulations, don't expect Coinbase to give up without a good fight. It's a battle that would take years to end. Who knows if all crypto exchanges and companies end up leaving the US in the future? Just my opinion

I'm now wondering whether you have actually read or understood the entire decision. It's not wrong to paraphrase the decision if only to make it brief and direct to the point, therefore, easier to digest, for as long as the point is there. Not saying everything verbatim is not equivalent to "mak[ing] it appear that something else was being said." We're not being tricked here. We're simply repeating what is there in the decision itself. But let me just bring you to the actual text of Judge Torres:

"For the reasons stated below, the SEC’s motion is GRANTED in part and DENIED in part, and Defendants’ motion is GRANTED in part and DENIED in part."

"For the foregoing reasons, the SEC’s motion for summary judgment is GRANTED as to the Institutional Sales, and otherwise DENIED. Defendants’ motion for summary judgment is GRANTED as to the Programmatic Sales, the Other Distributions, and Larsen’s and Garlinghouse’s sales, and DENIED as to the Institutional Sales."

The decision does not declare that XRP is "sometimes it is a security, sometimes not". Those are your own words, your personal interpretation. And those are the wrong words and interpretation.

The decision is actually founded upon the fact that "the SEC alleges that Ripple engaged in three categories of unregistered XRP offers and sales:

(1) Institutional Sales under written contracts for which it received $728 million;
(2) Programmatic Sales on digital asset exchanges for which it received $757 million; and
(3) Other Distributions under written contracts for which it recorded $609 million in “consideration other than cash.”"

The court's decision is based on these three different categories, and they ruled as follows:

• On Institutional Sales: "the Court concludes that Ripple’s Institutional Sales of XRP constituted the unregistered offer and sale of investment contracts in violation of Section 5 of the Securities Act."
• On Programmatic Sales: "the Court concludes that Ripple’s Programmatic Sales of XRP did not constitute the offer and sale of investment contracts.
• On Other Distributions: "the Court concludes that Ripple’s Other Distributions did not constitute the offer and sale of investment contracts."

These different decisions are the reason why there is not only one winner in the case. Clearly, the court favored the SEC in one category and opposed as to the other categories. In the same manner that it also granted Ripple's motions in some categories and denied in the other one.

And I repeat that Judge's Torres decision is not based on the XRP token alone but upon consideration of "the economic reality and totality of circumstances."

@Darker45. I am not saying that you are specifically tricked by the news. I am only implying that most of the time, all of us are influenced by what we read from mainstream news media. They will use different statements that might make the truth appear more abstract and make it appear that something else was being said.

On the ruling, as the judge declared, XRP as a digital token is not in and of itself a contract, a transaction or a scheme that embodies the howey test requirements of an investment contract. This is a very important statement the sets the precedent that many of the other crypto projects' tokens are not illegal securities. If the SEC wants to argue differently then they should appeal the ruling. We should not be tricked that sometimes it is a security, sometimes not. The ruling clearly declares that it is not.

What makes you think that I'm tricked by mainstream news media and some so-called experts?

How do you understand your quoted line, by the way?

It doesn't say that XRP is not a security. Neither does it say otherwise. The judge says that the decision is not to be based on those tokens themselves but on the "totality of circumstances" surrounding the offer, sales, and distribution of those tokens. The court decision even emphasized that "even if XRP exhibits certain characteristics of a commodity or a currency, it may nonetheless be offered or sold as an investment contract."

As a result, and I repeat, both Ripple and SEC are winners and losers at the same time as both their motions are partly granted and partly denied. 

@Darker45. Do not be tricked by mainstream news media and these experts that the judge of the ruling did not say that the tokens are not by themselves a contract, transaction that embodies the howey requirements.

The ruling is very clear. Read in page 15.

https://www.dropbox.com/e/scl/fi/bk1n1qn1tgscrcrrfldr8/SEC-v.-Ripple-Ruling-on-Motions-for-Summary-Judgment.pdf?dl=0&rlkey=cjyfdw5rl58diqxyi3qfgix7s

Correct me if I am wrong. The SEC's case against Coinbase was created because according to the SEC, those tokens that were being staked in the exchange were illegal securities. I reckon this can be very much connected with Ripple's case.

Also, why approve Coinbase to have an IPO if the SEC considered it an illegal securities exchange?

In any case, after Ripple's victory Do Kwon's lawyers want to use XRP's case as precedent for their own case hehehe.



Lawyers of former Terra boss Do Kwon have cited the recent XRP victory in the SEC lawsuit in a bid to dismiss the agency’s case against Kwon and Terra.

In a supplementary document filed on July 18, the legal team highlighted the decision made by Judge Analisa Torres in the SEC v. Ripple Labs case, which ruled that the digital asset XRP was not a security.

The defendants’ lawyers assert that the SEC’s claims against the tokens UST, LUNA, wLUNA, and MIR lack merit, drawing parallels to the Ripple ruling. According to the Ripple decision, certain sales of XRP did not meet the criteria to be classified as investment contracts under the Howey test.

Source https://thecryptobasic.com/2023/07/21/do-kwon-lawyers-invoke-xrp-victory-to-dismiss-sec-case-on-terra-collapse/

The decision as regards the SEC vs. Ripple wasn't black and white that you can declare Ripple as the winner. Both SEC and Ripple were winners and losers in the decision. Ripple's token was declared both a security and not. A security when directly sold to institutional investors and not when publicly sold on exchanges.

Coinbase's involvement in staking is a different case, although not entirely. If the case of Ripple can be any basis, then I guess coins purchased from exchanges, earned through mining, and any other way except being purchased from ICO, and then staked at Coinbase are probably not securities.

I cannot find Gensler's comments on the approval of Coinbase to be publicly listed at the same time suing it for being a broker of unregistered securities, but he's already commented on it. Coinbase is indeed a legal business and it was given a green light to go public, but these don't prejudice SEC's allegations of unregistered securities being sold on the platform.

After Ripple won their case against the SEC, it appears there are presently some new questions on how can uncle Gary go after Coinbase and declare it as an illegal secutities exchange when the SEC approved the exchange to have an IPO in the Nasdaq. If it was approved to become a public company offering shares in a traditional exchange, then it should imply that the SEC considers it a legal business.

The SEC might lose another case hehehehe.

No one has actually commented strongly on this statement. Is SEC actually correct or is Coinbase correct. Or are both correct in their jurisdiction. To be more clear, who knows how Binance operates in US? Does SEC monitor or regulates the activities of binance in US? Activities such as;
Listing process;
Staking activities;?

That's very sad. It would create a "deadlock" between the US government and the crypto industry for years on end. This could change if there's a new administration by the time 2025 comes in. Gary Gensler could be replaced by someone else who's more open to dialogue between crypto exchanges and service providers alike. Ultimately, Congress has the power to put an end to this nightmare once and for all.

I really hope the US gets back in the game just to make life easier for US investors and/or traders. Otherwise, crypto users in the country will feel a lot of pain in the long run. Who knows how the battle between Coinbase and the SEC will unfold in the future? Just my opinion

According to the SEC it might take years before the cryptospace will have regulatory clarity hehehe. It appears the SEC will continue harrassing exchanges and different projects in the cryptospace by using obscureness as a weapon because they can choose whatever projects they want to harrass based on uncle Gary's choosing.



Prominent crypto exchange Coinbase recently hit back at the U.S. Securities and Exchange Commission [SEC] by submitting a petition requesting clarification on crypto regulations. However, Coinbase disclosed that the response received from the regulators was not favorable to the cryptocurrency industry.

According to recent court documents, the SEC suggested that it is under no obligation to deliver Coinbase’s requests presented in the petition. The SEC also contended that Coinbase’s proposal for comprehensive reforms and rule-making within a constrained timeframe is a complex task. The SEC stated in its filling

“Neither the securities laws nor the Administrative Procedure Act impose on the Securities and Exchange Commission an obligation to issue the broad new regulations regarding ‘digital assets’ Coinbase has requested.”

Source https://watcher.guru/news/crypto-regulatory-clarity-may-take-years-sec

https://storage.courtlistener.com/recap/gov.uscourts.ca3.119939/gov.uscourts.ca3.119939.26.0_1.pdf

It's a pity since the US was once at the forefront of innovation. Now it'll be left behind in the dust as other countries embrace the revolution. This is bad for the US economy in the long term. The de-dollarization process has already begun, so it should only be a matter of time before another country takes the US' place as the world's leading economic hub.

I think there's no turning back, unless Congress gets its act together by revising the Biden administration's crypto regulatory framework. Crypto is all about decentralization, so I'm confident it will survive with or without the US. Who knows if in the future US crypto users migrate to a country with flexible crypto regulations? Just my opinion

@Abiky. Similar to the news article that I have shared before, president Xi Jinping wants China to be the leader in both information and blockchain technology. We can be quite certain that they have a roadmap for this going to 2030 already.

It is not only adoption where America is losing. America is also losing their blockchain developers to other more welcome jurisdictions hehe.



The U.S. is losing its lead in blockchain developers

Crypto and blockchain technologies are the next wave of the Internet, with the potential to fundamentally change money, the financial system, and the Internet more broadly. That the U.S. is losing market share in blockchain software development highlights the need for the country to take action to preserve its preeminence in financial markets and related technologies.

Source https://www.developerreport.com/developer-report-geography

Coinbase's move to launch an international exchange is a sign of warning that it will be leaving the US soon. It's a pity considering that Coinbase is one of the biggest (if not the biggest) crypto exchanges in the country. That would be a huge loss for America that's too hard to bear. If only Gary Gensler was removed from office, this madness would stop.

Either way, we cannot deny that the US is falling behind other countries in terms of crypto adoption. Europe is faring better than the US in this regard. Now China is considering getting back in the game by adopting crypto/Blockchain tech through Hong Kong. If major crypto companies move there, the US will be left behind in the dust. Sadly, US individuals will ultimately pay the price as they find it difficult (if not impossible) to get access to crypto using the USD. Let's hope the SEC changes its mind, and embraces crypto/Blockchain tech for the good of the industry. Just my opinion

Does anyone speculate that Coinbase will continue on fighting with their case against the SEC? This news article makes it appear that they might be planning an exit from America permanently until there is clear regulatory guidance and infrastructure. They are slowly closing down different service offerings from their business.

The reason according to Coinbase's spokesperson is low demand. I do not believe this.



Coinbase Borrow’s days are numbered.

Customers of the U.S.-based exchange who used the program – which allowed customers to borrow fiat loans up to $1 million against as much as 30% of their bitcoin holdings, with interest – received an email on Wednesday informing them that the last day to take out new loans would be May 10.

However, the closure of Coinbase Borrow seems – at least for now – to be unconnected to any enforcement action. A person familiar with the matter told CoinDesk the closure of Coinbase Borrow had nothing to do with either pending or past troubles with the SEC.

Source https://www.coindesk.com/business/2023/05/04/coinbase-to-stop-issuing-new-loans-via-coinbase-borrow/



The real warning sign for their exit is when Coinbase begins layoffs of employees again in America. They have fired 950 employees on January already. This might be 20% of their workforce.

Perhaps another subtle response against SEC, as Coinbase launches International Exchange


https://www.coinbase.com/blog/introducing-coinbase-international-exchange

So as US is trying to drive away Coinbase, they are making a bold move with this kind of offerings. So I guess sooner or later, maybe in the next year or so, they will be 100% out of the US jurisdiction and building somewhere else.

It could be agreed that US is really going anti crypto now with Binance, and maybe one day, they are falling behind the adoption of BTC.

Coinbase can not expect to follow regulations, there weren't even a real regulations to follow. Even Grayscale see it coming which they also need to file a lawsuit since SEC is not approving that BTC spot for them.

No one stands up against the regulators then all these blockchain companies will just keep inline bullied forever.

Agree. Congress really needs to work on that to ensure the healthy growth of the crypto/Blockchain industry within the US. There are already pro-crypto congressmen in the country, so it should only be a matter of time before this is realized. SEC Chairman Gary Gensler could eventually be removed from office if Congress decides to do so. How will this play out for the crypto industry, is yet to be seen. But I have a feeling things will turn out well without someone who's constanly "attacking" crypto all of the time.

All in all, Coinbase did well in stepping up to the game. It could win the lawsuit against the SEC due to unclear and outdated regulations. Maybe there's light at the end of the tunnel? Just my opinion

The problem with Gensler is, he is using decades old rule to regulate modern economy. Why not just make new or update old laws/rules but instead they are driving away a new industry in the USA.

Similar to what I mentioned in @rdbase's thread, this might only be the beginning. We might witness more exchanges and services in the cryptospace join the war against Gensler. Kraken's chief legal officer has already shared that they have begun fighting behind the scenes against the regulators. Who will be next? I speculate Binance.us, however, CZ likes to use decentralization to evade regulations hehehehe.



On Decrypt’s gm podcast, Marco Santori also said that the San Francisco-based firm was “fighting the fight” behind the scenes to get connected to the same FedNow network that all other big financial institutions use to settle transactions.

Kraken has been in hot water with regulators this year. T—he U.S. Securities and Exchange Commission hit the San Francisco-based digital asset exchange with a $30 million fine for violating securities laws back in February.

The regulator alleged that Kraken failed to register the offer and sale of their crypto asset staking-as-a-service program.

Source https://decrypt.co/138097/kraken-fighting-the-fight-behind-the-scenes-with-regulators

When Gensler couldn't answer in the congressional hearing about ETH being security or not, Armstrong's lawyer may have seen that they have a huge chance of winning a case against SEC.

The coinbase lawsuit will likely make the government introduce the Digital Currency Monetary Authority (DCMA) to regulate crypto just as the MICA of Europe crypto regulation authority. Gensler will be out of the picture soon.

It's nice to see Coinbase step up to the game by suing the SEC. We can consider it the "Knight of Crypto/Blockchain tech" if it wins the case. This is only a battle that's just getting started. I'm glad to see there are some US politicians in favor of crypto. They're now holding SEC chairman Gary Gensler accountable for this actions.

With increasing pressure against the SEC, it's likely the crypto industry will emerge victorious in the long run. The US needs crypto now more than ever, especially when its enemies are embracing it for their own benefit. If the US rejects the revolution, it'll be left behind in the dust. Maybe someday the US will go as far as backing the US Dollar with Bitcoin? Just my thoughts

I don't know what the outcome will be, but this is a move that I think is quite wise by Coinbase as the US law so far has not clearly regulated the crypto market. The SEC is just abusing its power to attack the industry, they don't have any strong evidence against us.
I hope other companies and exchanges will do the same as Coinbase to fight the SEC. That would be an interesting situation as many US politicians are also unhappy with what the SEC is doing with cryptocurrencies.

@Abiky. There was a case when the SEC sued someone but the judge made a decision that ruled against the SEC, citing that there was no clear regulatory structure to use as guidelines for the projects in the cryptospace. I have posted about it, however, it did not have the attention of the readers. I will find it and share it later.

In any case, news update. Coinbase sues the SEC heheheheheh.



Coinbase is suing the Securities and Exchange Commission.

The lawsuit follows on a petition for a rulemaking that the company filed with the SEC last summer, requesting the commission draft and approve a rule specific to digital assets. The lawsuit aims to force the agency to provide a yes or no to Coinbase's ask.

Since that request by Coinbase, the SEC has reopened custody and exchange rules to explicitly say that they apply to digital assets, but has not engaged in drafting a rule specific to digital assets.

Source https://www.theblock.co/post/228047/coinbase-sues-the-sec-for-answer-on-rule-specific-to-digital-assets

The US doesn't have a clear regulatory framework for crypto assets. It needs to "update itself" in order to stay ahead of the game. Due to the mess caused by both the SEC and CFTC, crypto exchanges are closing up shop all across the country. All we have left is Binance, Coinbase, and Kraken as the biggest exchanges in the US. If they go away, it will be a huge loss for the country in the long run (earning taxes from crypto transactions, etc).

The EU seems to be far ahead than the US in terms of crypto/Blockchain regulation, so it's likely major companies will migrate there. The SEC vs Coinbase lawsuit might be a long dilemma, so this is only the beginning. Let's hope all goes well for the sake of crypto adoption within the US. Just my thoughts

It's funny how SEC is threatening Coinbase with a lawsuit with the presumption that PoS coins like Ethereum are securities when another US government agency, CFTC, is suing Binance and CZ with a claim that Ethereum, like Bitcoin, is a commodity. There seems to be a lack of understanding and coordination here. Or is there some kind of a turf war between these two agencies?

Anyway, if the case will be filed, it will take years for the legal process to have a final decision. My hunch is that the longer the case drags on, the more advantageous for Coinbase. If it is a precedent, look at how Ripple is doing quite well in its case against the SEC.

Exactly, as we all know that the SEC is known for taking a strict stance on such matters, and they have been known to go after small-time traders as well. So it is possible that Coinbase even if it is a public company could potentially make them even more to face difficulties and penalties.
But in my mind --it is possible that Coinbase may have had some sort of legal loophole or justification for their actions, they follow and comply with financial regulations to avoid any possible legal issues like this which I doubt they are safe as of now.

Oh boy, if that's the real timeline of events, then Coinbase is in big trouble. Because nobody can just walk over the SEC like that and provide unregistered financial services in the US. I mean, they routinely take down small-time traders as "money transmitters". It is highly unlikely that the US government will let Coinbase just get away with it, *especially* since it's a public company.

Yeah, but just the same, if you have money then you have control, and that's what the US government is trying to prevent from happening. Because this exchanges are growing big by the day, meaning fiat is flowing on exchanges, so they have to stop because they want people to put their money on banks, in which the government has control.


I don't think there will be like some consensus or middle ground between US government and crypto. It's either they let it flow normally, or not. The problem is that they are selectively targeting exchanges now, Binance, Coinbase and even Kraken.

And so this lawsuit might set a precedence, gonna be a uphill battle for those exchanges, but if they win (chances are slim), it's going to be big for crypto industry.

It's not only about money, but it's also about control. The US government will continue to tighten regulations just to put crypto under control. They don't want it to replace the US Dollar after all. I have no problem with regulations as long as they don't limit the growth of the crypto/Blockchain industry. Too much regulations will only scare away crypto companies, startups, and even exchanges in the long run.

Let's hope the US government and the crypto industry work together for the benefit of all. Maybe there's light at the end of the tunnel? Just my opinion

Only an agreement between the two parties is the best outcome. Because if the SEC loses, they will also find other reasons to continue attacking exchanges or even the entire crypto industry. Even if XRP wins, Coinbase or Binance win, they will all continue to be in trouble in the future, the SEC and CFTC will certainly not ignore it.

Not only the US government but other governments will also soon do the same because what they are aiming for is money. All recent allegations are civil lawsuits, and as long as the exchanges agree and strictly comply with the fine payment, everything will be over.

I sure hope the SEC and crypto exchanges work together to ensure the industry grows without limitations. All of this mess makes the US a "laughing stock" compared to other crypto-friendly countries in the world. If Coinbase wins the lawsuit, then the SEC would have no other choice but to allow crypto exchanges to provide staking services to US-based customers. It might be forced to pay back Kraken's imposed fine of millions of dollars. Rest assured, that the SEC will find other ways to hunt down crypto exchanges claiming "it's protecting investors' interests".

Let's see how this will play out in the long run. Hopefully, the US would revise its crypto regulatory framework to stay at the forefront of innovation. Who knows if things will improve in the future? Just my opinion

They will both probably win.

There will be some things that the SEC will try to go after them for that are going to be too far reaching, and it will get shut down by a judge or a jury will find in their favor. There are some other things that Coinbase has probably crossed the line on. They have been warned and kept at it, just because I don't think but sticking ETH is a bad thing outside of the fact that it's ETH, that still does cross the fuzzy line. If they were smart they would have formed and offshore corporation and let them deal with it. all law making it perfectly clear that it is not an American based investment and not regulated by American laws.

Don't know if they would be able to get away with that long term, but short term I have seen many places do it.

-Dave

The SEC threatened Coinbase with a lawsuit if it doesn't comply with securities laws. According to the US agency, PoS coins are unregistered securities. Coinbase decided to ignore the SEC warning and continue offering staking services to US customers stating that "staking is handled by decentralized protocols". It's likely there will be a lawsuit between the SEC and Coinbase soon.

If the lawsuit becomes a reality, which do you think will win? The SEC or Coinbase? The US has been tightening its regulations towards the crypto industry, so a win by Coinbase could bring some "relief" to US-based crypto exchanges.

Your input will be greatly appreciated. Thank you.