Last summer, the U.S. Securities and Exchange Commission (SEC) sued crypto exchanges Coinbase and Binance, alleging they listed and traded unregistered securities in the form of various cryptocurrencies. This week, the regulator’s legal teams faced the exchanges in court as the companies argued the SEC did not make the case that those cryptos are securities.
You’re reading State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government.
The Story Unfolds in Court
There’s no rest for the weary. Last week’s story about the SEC’s approval of spot bitcoin exchange-traded funds (ETFs) was just the beginning. This week, the regulator’s Enforcement Division argued that it has a case to make about cryptos being securities, reigniting the courtroom showdown between the SEC and major crypto exchanges.
Repercussions for the Crypto Industry
A hefty chunk of the U.S. crypto industry may hinge on the outcome of the SEC’s cases against Coinbase, Binance/Binance.US, and Kraken. The court’s decision on whether various digital assets are indeed securities could impose new registration and reporting requirements on issuers and trading platforms, shaping the future landscape of the industry.
Legal Showdown
In June 2023, the SEC sued Coinbase and Binance, alleging that the companies listed digital assets like solana (SOL), filecoin (FIL), and axie infinity (AXS), among others, as unregistered securities. Amid widespread backlash, the industry has seen lawmakers, industry lobbyists, and others filing amicus briefs urging the courts to dismiss the cases entirely.
Judge Katherine Polk Failla asked tough questions during the hearing, and an SEC attorney highlighted that the token itself was not a security, but rather the actual transactions involved during the hearing. The judiciary process has unfolded with several twists, such as a snow-induced delay of the hearing for the SEC’s case against Binance, and a separate hearing challenging a longstanding Supreme Court precedent known as the Chevron doctrine.
The Ripple Effect
These legal proceedings have profound implications for the broader regulatory environment. If a dismissal occurs at this stage, it could catalyze a momentum for new crypto legislation in Congress and a re-assessment of federal regulatory agencies’ latitude to interpret laws for rulemaking purposes.
Snapshot of the Week’s Events:
- 09:00 UTC (10:00 a.m. CET) The European Banking Authority (EBA) held the first of two hearings on the Markets in Crypto Assets Regulation (MiCA), looking at regulatory technical standards (RTS) and implementing technical standards (ITS).
- 13:00 UTC (2:00 p.m. CET) The EBA held its second MiCA hearing, focusing on guidelines for preventing illicit crypto activities.
- 15:00 UTC (10:00 a.m. EST) There was a hearing in SEC v. Coinbase.
- 15:00 UTC (10:00 a.m. EST) A hearing in SEC v. Binance was delayed to Monday due to snow in Washington, D.C.
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