{"id":3067698,"date":"2024-01-17T17:18:43","date_gmt":"2024-01-17T22:18:43","guid":{"rendered":"https:\/\/wordpress-1016567-4521551.cloudwaysapps.com\/plato-data\/coinbase-lawsuit-federal-judge-blasts-sec-during-first-oral-arguments\/"},"modified":"2024-01-17T17:18:43","modified_gmt":"2024-01-17T22:18:43","slug":"coinbase-lawsuit-federal-judge-blasts-sec-during-first-oral-arguments","status":"publish","type":"station","link":"https:\/\/platodata.io\/plato-data\/coinbase-lawsuit-federal-judge-blasts-sec-during-first-oral-arguments\/","title":{"rendered":"Coinbase Lawsuit: Federal Judge Blasts SEC During First Oral Arguments"},"content":{"rendered":"
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The first round of oral arguments between Coinbase and U.S. regulators during their major legal war has come to a close.<\/p>\n

The result? No immediate rulings \u2013 but the judge overseeing the case found herself impressed with Coinbase\u2019s understanding of the issues and technologies at hand.<\/p>\n

Coinbase VS SEC on Staking<\/h2>\n

Judge Katherine Polk Failla began Wednesday\u2019s hearing<\/a> by crediting the \u201cDeFi people\u201d for filing a \u201creally fine\u201d amicus brief on behalf of Coinbase months ago, which explained blockchain staking \u201carguably better\u201d than the Securities and Exchange Commission (SEC) had previously done.<\/p>\n

In its August amicus, the DeFi education fund argued<\/a> that Coinbase\u2019s staking as a service product does not qualify as an unregistered security \u2013 one of the SEC\u2019s core allegations from its 100-page lawsuit against the crypto exchange last June.<\/p>\n

It explained that Coinbase\u2019s role in staking provision was \u201cpurely ministerial\u201d and akin to an IT service provider. Thus, it doesn\u2019t meet the four prongs of the Howey Test \u2013 the SEC\u2019s near-century-old legal standard for identifying investment contracts.<\/p>\n

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Coinbase and other crypto industry leaders often argue that the Howey Test is an outdated<\/a> standard with which to govern the crypto industry.<\/p>\n

Is \u2018Howey\u2019 Outdated?<\/h2>\n

Judge Failla referenced such arguments during questioning, asking the SEC\u2019s lawyer why she shouldn\u2019t consider similar arguments from Cynthia Lummis \u2013 a crypto-supportive Republican senator.<\/p>\n

\u201cShe\u2019s not just a random Senator, she\u2019s someone deeply involved in the space. Why is she wrong?\u201d asked the Judge.<\/p>\n

Paraphrasing Lummis\u2019s position on the Howey Test, Failla added:<\/p>\n

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\u201cWe\u2019ve had a good run. We\u2019ve had 90 years where these securities laws have been able to apply to these markets. But now we have something new.\u201d<\/p>\n<\/blockquote>\n

Broadly speaking, Coinbase spent the five-hour hearing arguing that the SEC is using an overbroad interpretation of Howey and that none of the 12 tokens on Coinbase\u2019s platform that the agency alleges are securities are as such. The company\u2019s lawyer stated.<\/p>\n

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\u201cI think there would have been a lot of surprise in the 1933\/1934 Congress to find an investment contract didn\u2019t have anything to do with a contract at all.\u201d<\/p>\n<\/blockquote>\n

According to Fox Business journalist Eleanor Terret on X, lawyers claim<\/a> that Failla should take roughly 2 to 6 weeks to determine if the case should be dismissed, or enter deep legal water as with the agency\u2019s 3.5-year lawsuit against Ripple Labs.<\/p>\n

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