Join 250,000+
professionals today

Add Insights to your inbox - get the latest
professional news for free.

Coinbase Takes SEC Head-On in Crypto’s Legal Battle

Join our 250K+ subscribers

Join our 250K+ subscribers

Subscribe

10 JAN 2025 / SEC UPDATES

Coinbase Takes SEC Head-On in Crypto’s Legal Battle

Coinbase Takes SEC Head-On in Crypto’s Legal Battle

The crypto world is no stranger to turbulence, but the recent developments in the Coinbase vs. SEC case have set a new precedent. With the stakes higher than ever, a federal court ruling has paused the SEC’s case against Coinbase, allowing the crypto exchange to take its appeal to the U.S. Court of Appeals for the Second Circuit. This move is a rare legal twist that could redefine how cryptocurrencies are classified under U.S. securities law.

Are Cryptocurrencies Securities?

The SEC insists that most digital assets, except Bitcoin, meet the criteria under the Howey Test and should therefore be regulated as securities like stocks and bonds. Coinbase disagrees, arguing that tokens traded on its platform don’t qualify as investment contracts. Judge Katherine Polk Failla recently ruled in favor of Coinbase’s request to appeal, stating that the legal question presents "substantial grounds for differing opinions." This ruling not only pauses the SEC’s case but also gives Coinbase a shot at early clarity from higher courts.

Paul Grewal, Coinbase’s Chief Legal Officer, expressed his optimism: "Over the strenuous objection of the SEC, Judge Failla has granted our motion for leave to pursue an interlocutory appeal and stayed the district court litigation. On to the Second Circuit, we go." The Second Circuit’s decision could not only shape Coinbase’s future but also create a domino effect across the crypto industry.

The Howey Test

The Howey Test, a decades-old legal standard, has been at the center of crypto regulation debates. Originally designed for traditional investments, many argue it doesn’t fit decentralized digital assets. Coinbase contends that token issuers often don’t owe obligations to buyers, failing a key Howey criterion. Judge Failla seemed to acknowledge these challenges, stating that applying the Howey Test to crypto transactions involves "fundamental difficulties." Legal experts like Ryan VanGrack, Coinbase’s VP of Legal, see this as a potential turning point: "This decision is a big deal—it’s rare for a district court to grant such a motion.

It’s not just securities law creating questions for crypto space. Crypto.com suing the SEC for overstepping its authority by enforcing rules without providing clear guidelines and tax implications, particularly whether staking rewards represent taxable income, have also added to the uncertainty surrounding cryptocurrencies. As the IRS increases oversight, understanding whether crypto staking is taxable as income or new property has become critical for investors and businesses alike.

$6.5 Billion in Bitcoin Up for Grabs

While Coinbase battles the SEC, the Department of Justice has its hands full with the largest Bitcoin seizure in history. After years of legal wrangling, a federal judge has cleared the DOJ to sell 69,370 Bitcoin—worth $6.5 billion—seized from the Silk Road hacker known only as "Individual X."

This decision has rattled investors, with concerns that such a massive sale could flood the market and tank Bitcoin prices. However, the government has historically staggered its auctions to avoid market chaos. Blockchain analytics firm Arkham Intelligence noted a recent transfer of $1.9 billion in Silk Road Bitcoin to Coinbase, sparking fears of an imminent sale.

Trump’s Crypto Revolution?

The crypto community is watching closely as President-elect Donald Trump prepares to take office. A vocal Bitcoin supporter, Trump has pledged to establish a national Bitcoin reserve and keep all government-held Bitcoin intact. "Never sell your Bitcoin," Trump famously said at a conference in Nashville last year.

He has also nominated Paul Atkins, a former SEC commissioner, to succeed Gensler. Known for his crypto-friendly views. His administration is also expected to be more lenient toward the crypto regulations, potentially reversing actions taken under outgoing SEC Chair Gary Gensler. Senator Cynthia Lummis, a longtime crypto advocate, has echoed Trump’s sentiment: "The U.S. must embrace Bitcoin not just as an investment but as a strategic asset. My legislation will ensure the government treats it as such."

The SEC vs. Everyone Else

Coinbase isn’t the only one feeling the heat. Ripple, the company behind XRP, is also locked in a legal battle with the SEC, with conflicting rulings in lower courts complicating the regulatory picture. Coinbase has criticized the SEC for its inconsistent approach, pointing out that the agency approved its public listing while later questioning the legality of its operations.

The crypto industry is now rallying for clearer guidelines. "We need a regulatory framework that encourages innovation while protecting investors," said Michael Sonnenshein, CEO of Grayscale Investments. "Cases like Coinbase’s could provide much-needed clarity, but Congress must step in to define the rules of the road."

What’s Next for Crypto?

As Coinbase heads to the Second Circuit and Bitcoin auctions loom, one thing is clear: the crypto industry is at a crossroads. Whether it’s battling the SEC, navigating government sales of seized assets, or awaiting new legislation, these developments could set the tone for crypto’s future in the U.S. For now, investors and exchanges alike are holding their breath. After all, as the saying goes, “When the chips are down, the only way is up.” Subscribe to our newsletter for the latest insights and updates delivered straight to your inbox.

Until next time…

Don’t forget to share this story on LinkedIn, X and Facebook

📢MYCPE ONE Insights has a newsletter on LinkedIn as well! If you want the sharpest analysis of all accounting and finance news without the jargon, Insights is the place to be! Click Here to Join

Subscribed
Tiffani purchased a subscription.
Subscribed
Matthew purchased a subscription.
Subscribed
Kim purchased a subscription.
Subscribed
Randall purchased a subscription.
Subscribed
Ahmed purchased a subscription.
Subscribed
Richard purchased a subscription.
Subscribed
Mary Jo purchased a subscription.
Subscribed
Vance purchased a subscription.
Subscribed
IRVIN purchased a subscription.
Subscribed
Melissa purchased a subscription.
Subscribed
Peter purchased a subscription.
Subscribed
Elizabeth purchased a subscription.
Subscribed
Prasad purchased a subscription.
Subscribed
Gary purchased a subscription.
Subscribed
LYNWOOD purchased a subscription.
Subscribed
Yang purchased a subscription.
Subscribed
Mary purchased a subscription.
Subscribed
Kathy purchased a subscription.
Subscribed
salah purchased a subscription.
Subscribed
Jody purchased a subscription.
Subscribed
Regina purchased a subscription.
Subscribed
Suzanne purchased a subscription.
Subscribed
Becky purchased a subscription.
Subscribed
Devanshu purchased a subscription.
Subscribed
Denise purchased a subscription.
Subscribed
Angie purchased a subscription.
Subscribed
Jb purchased a subscription.
Subscribed
Tracee purchased a subscription.
Subscribed
James purchased a subscription.
Subscribed
Ronald purchased a subscription.
Subscribed
Binta Amadou purchased a subscription.
Subscribed
Peter R purchased a subscription.
Subscribed
Karri purchased a subscription.
Subscribed
Chelsea purchased a subscription.
Subscribed
James purchased a subscription.
Subscribed
Pamela purchased a subscription.
Subscribed
Brandon purchased a subscription.
Subscribed
Rhonda purchased a subscription.
Subscribed
Camilla purchased a subscription.
Subscribed
Eva purchased a subscription.
Subscribed
Kensuke purchased a subscription.
Subscribed
Jamiu purchased a subscription.
Subscribed
guglielmo purchased a subscription.
Subscribed
Michael purchased a subscription.
Subscribed
Stevie purchased a subscription.
Subscribed
Jessica purchased a subscription.
Subscribed
Kami purchased a subscription.
Subscribed
Jimmy purchased a subscription.
Subscribed
priya purchased a subscription.
Subscribed
TRAM purchased a subscription.
Subscribed
Aaron purchased a subscription.
Subscribed
Eileen purchased a subscription.
Subscribed
Gina purchased a subscription.
Subscribed
Elizabeth purchased a subscription.
Subscribed
FUCHINANYA purchased a subscription.
Subscribed
Gardner purchased a subscription.
Subscribed
Samantha purchased a subscription.
Subscribed
Huma purchased a subscription.
Subscribed
Mohammad purchased a subscription.
Subscribed
Michael purchased a subscription.
Subscribed
Michael purchased a subscription.
Subscribed
Janet purchased a subscription.
Subscribed
Jennifer purchased a subscription.
Subscribed
Nathan purchased a subscription.
Subscribed
Corey purchased a subscription.
Subscribed
Diane purchased a subscription.
Subscribed
Thomas purchased a subscription.
Subscribed
Aastha purchased a subscription.
Subscribed
JOHN purchased a subscription.
Subscribed
Lauren purchased a subscription.
Subscribed
Terry purchased a subscription.
Subscribed
Maria purchased a subscription.
Subscribed
Jay purchased a subscription.
Subscribed
Marsha purchased a subscription.
Subscribed
Kevin purchased a subscription.
Subscribed
Matt purchased a subscription.
Subscribed
Reid purchased a subscription.
Subscribed
Kathryn purchased a subscription.
Subscribed
Sarah purchased a subscription.
Subscribed
Fiona purchased a subscription.
Subscribed
Deshmon purchased a subscription.
Subscribed
Luke purchased a subscription.
Subscribed
Philippe purchased a subscription.
Subscribed
charles purchased a subscription.
Subscribed
Tim purchased a subscription.
Subscribed
Raymond purchased a subscription.
Subscribed
Oscar purchased a subscription.
Subscribed
Patrick purchased a subscription.
Subscribed
Shailendra purchased a subscription.
Subscribed
James purchased a subscription.
Subscribed
princess purchased a subscription.
Subscribed
Alain purchased a subscription.
Subscribed
Cathrine purchased a subscription.
Subscribed
Jessica purchased a subscription.
Subscribed
ANURUDDAW purchased a subscription.
Subscribed
Penelope purchased a subscription.
Subscribed
Kim purchased a subscription.
Subscribed
Spencer purchased a subscription.
Subscribed
Yuko purchased a subscription.
Subscribed
Patrice purchased a subscription.