Judge in Coinbase case says SEC’s securities definition may be too broad
Jan. 17, 2024
By Mike Dalton
A court hearing between Coinbase and the U.S. Securities and Exchange Commission (SEC) took place on Jan. 17 concerning earlier charges.
In June 2023, the SEC alleged that Coinbase illegally operated a unregistered national securities exchange, broker, and clearing agency and that its crypto staking service involved the unregistered sale and offering of securities.
Though Judge Katherine Polk Failla did not provide a ruling or judgment today, she expressed concerns in line with those of Coinbase.
According to Reuters, Judge Failla commented on 13 crypto tokens that Coinbase provides customers with access to but does not issue, and which the SEC considers securities. The judge questioned the SEC’s arguments, stating:
“I am concerned… that what you’re asking for is to broaden the definition of what constitutes a security.”
The SEC’s assistant chief litigation counsel, Patrick Costello, instead argued that the crypto tokens in question are part of a larger enterprise (ie. blockchain network) and are therefore akin to investment contracts. He added that the value of each token increases as the value of the network or ecosystem grows. By extension, each asset could be considered a security as the case develops.
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