Coinbase’s legal team has approached U.S. District Judge Katherine Failla, urging her to reconsider a previous ruling that classified secondary sales of cryptocurrency assets as securities transactions. This request is part of Coinbase’s ongoing legal dispute with the U.S. Securities and Exchange Commission (SEC), as highlighted in a letter dated March 5.
Michael Savitt, representing Coinbase, argues that the SEC’s classification of crypto sales in the secondary market as securities contracts lacks sufficient legal basis, particularly as it was not thoroughly examined in court. This legal battle stems from a lawsuit initiated by the SEC against Ishan Wahi and others in July 2022, related to allegations of insider trading involving nine cryptocurrencies.
The dispute intensified when the SEC reached a settlement with the Wahi brothers in June 2023, while securing a default judgment against Ramani. Coinbase’s attorney, Savitt, criticized this judgment, stating it lacked substantive legal debate and should not serve as precedent in ongoing proceedings.
Coinbase’s move follows the SEC’s attempt on March 4 to use the outcome of the Wahi insider trading case to challenge Coinbase’s position. The ongoing dialogue between Coinbase and the SEC involves debates over the application of the Howey test, used to determine if crypto assets on Coinbase’s platform are securities.
In June 2023, the SEC accused Coinbase of violating federal securities laws by listing 13 tokens it deemed securities. Now, Coinbase seeks a judicial order to dismiss the SEC’s lawsuit, questioning the regulator’s oversight of crypto exchanges.
This legal confrontation underscores the regulatory ambiguity surrounding cryptocurrencies, which poses significant challenges for centralized exchanges like Coinbase. With the SEC’s intensified regulatory actions under Jay Clayton and Gary Gensler’s leadership, companies such as Ripple, Binance, and Coinbase face increased scrutiny, amid slow legislative progress on cryptocurrency regulation.