In a recent court filing, Coinbase urged that cryptocurrencies should not be considered security because it is difficult to determine the identities of the parties, and there are no obligations between the buyer and seller.
Coinbase emphasizes that it is crucial for the cryptocurrency industry to determine whether secondary market transactions of cryptocurrencies should be classified as investment contracts under securities regulations.
The legal battle between Coinbase and the Securities and Exchange Commission (SEC) has grabbed the attention of the financial landscape and crypto community. Under the previous anti-crypto chairman, Gary Gensler, the SEC attacked the two biggest crypto exchanges, Coinbase and Binance.
In the lawsuit, the SEC has accused Coinbase of violating U.S. security laws by not registering its operations as a securities exchange, broker, or clearing agency.
To defend its operations, Coinbase has filed a counter-petition to the Second Circuit Federal Appeals Court to define whether the crypto transactions on its platform fall under securities law as investment contracts.
In a similar battle, the Southern District of New York delivered a crucial ruling that clarified XRP’s regulatory status. The court ruled that XRP itself is not inherently a security, which provided a great relief to retail investors. The legal victory has also set a precedent for other cryptocurrencies.
With the Federal Appeals Court’s ruling, the crypto sector will be mainly affected. If crypto trading is classified as non-securities, it could bring regulatory clarity. This could also boost the market confidence amid the bullish run in the crypto market.
On the flip side, the decision of the Coinbase case might cause the authorities to have stricter regulations of the crypto sector which might resist the innovativeness and the growth of the market. However, under the pro-crypto President, Donald Trump’s new administration, the crypto community is expecting the crypto-friendly policies.
Also Read: Ripple vs. SEC: Better Markets Files an Amicus Brief & Backs SEC