This Thursday, Coinbase and the U.S. Securities and Exchange Commission (SEC) will meet in court for the first time in the federal regulator’s lawsuit against the crypto exchange. The hearing may give us a sense of how the judge is looking at the case in its earliest stages, and the questions asked and answers given should provide some hints on how the case may go.
The SEC sued Coinbase in early June alleging that the cryptocurrency trading platform was simultaneously operating as a broker, an exchange, and a clearinghouse for unregistered securities. Coinbase has argued that the allegations shouldn’t even apply to its operations, stating that Because no such obligations are carried in the transactions over Coinbase’s secondary market exchange, and because the value that Coinbase purchasers receive through these transactions inheres in the things bought and traded rather than in the businesses that generated them, the transactions are not securities transactions.
The SEC was not swayed by this argument, and in its response to the answer, the regulator said Coinbase attempts to construct its own test for what constitutes an investment contract. The SEC also pointed to Coinbase’s public disclosures that it might get sued as evidence that the exchange has already acknowledged the possibility.
The parties will meet in court this Thursday, at 10:00 a.m. ET, in a pre-motion hearing.