Coinbase’s Chief Legal Officer (CLO), Paul Grewal, has emphasized that cryptocurrencies are here to stay and urged the Securities and Exchange Commission (SEC) to establish clear regulatory guidelines. The ongoing dispute between the SEC and Coinbase centers around whether an investment contract necessitates explicit contractual details.
The legal battles between the SEC and various crypto companies, including Coinbase Global and Ripple Labs, have provided a glimmer of hope for the web3 industry in the United States. Despite the approval of spot Bitcoin exchange-traded funds (ETFs) earlier this year, Senator Cynthia Lummis and other regulators have urged the Senate Banking Committee to enact unambiguous crypto regulations before the upcoming elections.
As previously reported by Crypto News Flash, China, through Hong Kong, has approved spot Bitcoin and Ether ETFs, allowing local investors to diversify their portfolios. The demand for digital assets has surged due to escalating global conflicts in the Middle East.
In June of last year, the SEC charged Coinbase Global with operating its crypto trading platform as an unregistered national securities exchange, broker, and clearing agency. The SEC also accused Coinbase Global of failing to register its crypto staking-as-a-service program, putting many altcoins at risk.
Coinbase’s legal team, led by Paul Grewal, has consistently argued that the SEC has exceeded its authority and failed to establish clear regulations for the crypto industry. On April 12, 2024, Coinbase’s legal team filed a memorandum of law supporting Coinbase’s motion to certify the interlocutory appeal.
Coinbase’s attorneys believe that the court should dismiss the case due to lack of merit, particularly with regards to the Howey test. According to Grewal, Coinbase Global believes that investment contracts should have a contractual component, which is in disagreement with the SEC. Additionally, crypto exchanges involve voluntary transactions between buyers and sellers without any binding contracts, apart from smart contracts.
Coinbase has filed a brief seeking the court’s permission to pursue an interlocutory appeal in their case against the SEC. The controlling question in this appeal is whether an investment contract requires a contractual element. Coinbase believes it does, while the SEC disagrees.
The outcome of Coinbase’s case could potentially impact the ongoing SEC vs Ripple case. The SEC intends to request a $2 billion fine against Ripple in a possible settlement, but Ripple’s executives, led by CEO Brad Garlinghouse, have vowed to fight back. Furthermore, Judge Analisa Torres has ruled that XRP sales on crypto exchanges do not constitute investment contracts. If Coinbase successfully convinces the court that investment contracts require a contractual element, Ripple may have an advantage in their lawsuit.
The cryptocurrency market recently experienced its first major correction in the 2024 bull cycle, just days before the highly anticipated Bitcoin halving. The demand for digital assets has surpassed government attempts to regulate the industry through fragmented regulatory frameworks.
According to the latest market data, the total crypto market cap has increased by over 4 percent in the past 24 hours, reaching around $2.53 trillion on Monday. The price of Bitcoin has rebounded by over 3.5 percent and is trading slightly above $66,273.
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