- The Securities and Exchange Commission has scored a major victory in its case against Coinbase.
- A judge ruled that the SEC's claims that virtual currency exchanges engaged in unregistered sales of securities can be tried by a jury at trial.
- Coinbase shares fell about 2.5% on news of the ruling in Manhattan federal court.
This illustration taken on June 8, 2023, shows a smartphone with the Coinbase logo and a cryptocurrency representation resting on a keyboard.
Dado Ruvik | Reuters
The Securities and Exchange Commission won a major victory in its case against Coinbase on Wednesday. The judge ruled that the commission's claims that virtual currency exchanges engaged in unregistered sales of securities could be tried by a jury at trial.
Coinbase stock fell about 2.5% on news of a Manhattan federal court ruling rejecting the company's bid to dismiss the SEC's complaint.
Regulators first filed suit against Coinbase in June, alleging the company was acting as an unregistered broker and exchange. The agency also demanded that the company continue to “permanently restrain and prohibit” such conduct.
“While the nomenclature 'crypto' may be recent, the transactions at issue fit comfortably within the framework courts have used to identify securities for nearly 80 years,” wrote U.S. District Judge Catherine. Polk Feira said in the judgment.
“The court finds that the SEC properly alleges that Coinbase engaged in the unregistered offering and sale of securities through its staking program,” Failla wrote.
Elsewhere in the same decision, the justices agreed to dismiss the SEC's claims in the case that Coinbase acted as an unregistered broker by making its wallet application available to customers.
The company responded to CNBC's request for comment. A series of posts about X By Paul Grewal, Chief Legal Officer of Coinbase.
“We are ready for this and look forward to revealing more about the SEC’s internal views and discussions regarding cryptocurrency regulation,” Grewal wrote.
The news comes as Coinbase takes a larger role in Wall Street's adoption of cryptocurrencies. In January, the SEC approved a number of US spot Bitcoin exchange-traded funds. Many of these ETFs partner with Coinbase as their custodial partner.
These US spot funds have seen record inflows since their launch in January. In total, they brought in about $52 billion.
SEC Chairman Gary Gensler said in June that trading platforms like Coinbase “call themselves exchanges” but “have a lot of mixed functionality.”
“I can't imagine the New York Stock Exchange running a hedge fund,” Gensler told CNBC in June.
