Coinbase, the largest U.S. crypto exchange by trading volume, has come up against the U.S. Securities and Exchange Commission (SEC) in the first court hearing that lasted over two hours. The hearing came a month after the SEC filed a lawsuit against Coinbase over alleged U.S. securities law violations, labeling 12 tokens listed on the exchange as unregistered securities. During the hearing, Judge Katherine Polka Faila questioned both sides on various topics, including the definitions of securities and staking. - The case was closely watched since it has the potential to establish a precedent for securities laws, crypto market structure, and the SEC's regulatory power.
- In its first legal response to the agency's allegations, Coinbase argued that even if all the allegations in the lawsuit are true, they are beyond the SEC's legal authority, citing the SEC Chair Gary Gensler's testimony from 2021 when he said only Congress had the power to regulate the crypto industry.
- At the court hearing, the SEC's counsel said the agency does not try to regulate the whole crypto market in the U.S., but the conduct.
- The counsel also stated that Bitcoin (BTC) is not a security and its status is not in question, though they do not want to speak on Ether (ETH).
- Besides, Judge Faila pointed out that it is normal for Coinbase to think what it was doing was okay since the SEC approved it to go public as a securities exchange in 2021.
- U.S. Judge concluded the hearing by asking both sides to present a realistic schedule for the next hearing, to keep the page limits on materials, and to use reasonable footnotes.
One day before Coinbase, Binance was also sued by the SEC through a 136-page complaint over U.S. law violations. - Over the last several months, many other crypto exchanges, including Kraken, Gemini, and Bittrex, came under increased scrutiny by the SEC.
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