After several months of speculation, the US Securities and Exchange Commission (SEC) has filed a lawsuit against Coinbase, a prominent cryptocurrency company based in the United States. The lawsuit, filed on Tuesday in the Southern District of New York, alleges that Coinbase and its parent company, CGI, violated securities regulations by operating as an unregistered broker for their primary cryptocurrency trading platform, Coinbase Prime, as well as the Coinbase Wallet.
However, a top lawyer who has analyzed the situation suggested that the top watchdog is set to face a loss in the court over its assertion on several grounds. Read on to find out the details.
SEC Lawsuit and Regulatory Authority Debate
According to Attorney James Murphy, the US Securities and Exchange Commission (SEC) has accused Coinbase of operating as an unregistered securities exchange since 2019. However, it’s worth noting that in April 2021, the SEC approved Coinbase’s application to become a publicly traded company.
Murphy emphasized that SEC Chairman Gary Gensler testified before Congress on May 6, 2021, stating that the current law does not grant the agency the power to regulate cryptocurrency exchanges. Based on this testimony, the attorney suggests that the SEC should not be able to pursue its claims in court. It was further pointed out that the SEC chair’s testimony was entirely accurate. Congress will have to clarify which regulatory agency has the authority over crypto exchanges.
2/ After he was confirmed to his post as Chairman of the SEC, Gensler testified to Congress, on May 6, 2021, that:
THE SEC DOES NOT HAVE AUTHORITY FROM CONGRESS TO REGULATE CRYPTO EXCHANGES.
Watch this 👇 pic.twitter.com/mk48S36FHm
— MetaLawMan (@MetaLawMan) May 3, 2023
Gensler’s Testimony To Favour Coinbase?
Coinbase is currently facing charges for operating illegally, and its legal team is expected to closely examine SEC Chairman Gensler’s testimony given on May 6, 2021. The attorney pointed out that all testimony from an SEC chairman undergoes internal evaluation before being presented.
There is plenty of evidence in the form of emails, meeting notes, memos, and internal messages that preceded the testimony. These communications among SEC officials might shed light on how the agency reached a consensus on regulating crypto exchanges without having the necessary legal authority from Congress.
Numerous lawsuits have caused uncertainty in the crypto space. This particular lawsuit has heavily affected the share price of Coinbase which is down by 14% in 5 days.
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