On Friday, Coinbase announced that the SEC staff had agreed in principle to dismiss its case alleging the company had failed to register as a securities exchange, broker-dealer, and clearing agency. We can expect the Commission to approve the move in this Thursday’s closed Commission meeting and the court filing to come soon thereafter.
The news came a day after the SEC officially announced that its disbanded Crypto Assets and Cyber Unit would be replaced with a Cyber and Emerging Technologies Unit. The SEC said the new unit, among other things, would focus on protecting retail investors from bad actors, including fraud committed using emerging technologies such as artificial intelligence and machine learning, and blockchain technology and crypto assets.
Legal Tokens
This is a dramatic reversal of fortune for Coinbase and crypto intermediaries operating in the United States, or who would like to operate here.
Still, many questions remain. Will the Commission issue a statement explaining its reasons for dropping the suit? Will that statement provide clarity on how, in the Commission’s view, secondary market transactions in tokens differ from the initial offer and sale? How will the dismissal deal with Coinbase’s staking program?
And what will the Commission do if federal courts’ views diverge from its own, including in private civil suits? After all, the court presiding over the matter denied Coinbase’s Motion for Judgment on the Pleadings in a decision that suggested the case was all but over. In doing so, the court adopted the approach of the Terraform Labs and Telegram courts, among others, in rejecting any kind of privity requirement between the issuer or promoter, on the one hand, and the purchaser, on the other, that the Ripple court appeared to require.
