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The US Securities and Exchange Commission (SEC) has won a major victory in its lawsuit against Coinbase; On Wednesday, a judge ruled that the SEC could file charges that the exchange engaged in illegal sales registration.
Coinbase shares fell about 2.5% after the decision was announced in Manhattan federal court, reflecting investors’ reaction to negative growth.
The U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Coinbase in June, alleging that the company operated as an unregistered broker and exchange and seeking permanent injunctions to halt those activities.
U.S. District Judge Katherine Polk Failla upheld the SEC’s accusations in her decision, saying that the relevant transactions, particularly those related to Coinbase’s Stake program, were based on established criteria that courts have used over the years to define securities.
Judge Failla’s decision supported the SEC’s allegations regarding the Stake program, while rejecting the regulator’s allegations that Coinbase was acting as an unregistered investor through its e-wallet application.
Coinbase’s response to the decision includes various statements made by the company’s legal director, Paul Grewal, on the social media platform. Currently, the US Securities and Exchange Commission (SEC) quickly removed Failla from made the decision. Ongoing litigation in District of Columbia federal court against another successful cryptocurrency exchange, Binance. The U.S. Securities and Exchange Commission’s lawsuit against Binance accuses Binance of various unregistered offerings and sales of crypto asset securities.
This decision comes at an important time for Coinbase as it plays a larger role in Wall Street’s adoption of cryptocurrencies. Earlier this year, the SEC approved several U.S.-based Bitcoin exchange-traded funds (ETFs), most of which partner with Coinbase as their controlling partner. ETFs have attracted significant interest from investors, with a total investment of approximately $52 billion since their launch in January.
SEC Chairman Gary Gensler’s previous statement confirmed the investigation into platforms like Coinbase, expressing concerns about conflicts of interest arising from the Coinbase integration. There are many roles on these platforms. Gensler highlighted the regulatory challenges posed by the changing landscape of cryptocurrency trading platforms, comparing Coinbase’s operations to traditional exchanges involved in these activities.