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.
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A Familiar Battle
While the story last week was about whether or not the SEC would approve spotbitcoin exchangetraded funds (ETFs) and the rough sequence of events that occurred before the approval was final, this week found us back in court as the regulator’s Enforcement Division argued that it has a case to make about cryptos being securities.
Repercussions for the Industry
The outcome of the SEC’s cases against Coinbase, Binance/Binance.US, and Kraken will have significant implications for the U.S. crypto industry. If federal judges agree that various digital assets are securities, it will result in new registration and reporting requirements on issuers and trading platforms. Alternatively, a ruling against the SEC could provide a green light to a significant portion of the industry by rejecting the regulator’s assertions of overreach and advocating for tailored laws by Congress.
The Legal Landscape
In June 2023, the SEC sued Coinbase and Binance, alleging the companies listed digital assets like solana (SOL), filecoin (FIL), and axie infinity (AXS), among others, but that these assets were really unregistered securities. Despite prior signals from SEC Chair Gary Gensler, the industry reacted strongly to these suits. Over recent months, lawmakers, industry lobbyists, and others have filed amicus briefs urging the courts to dismiss the cases entirely. The outcomes of the Coinbase and Binance cases share core ideas. Although a dismissal at this stage is unlikely, Judge Katherine Polk Failla is yet to make a ruling following some tough questions she raised during the hearing.
An SEC attorney clarified during the hearing that the token itself was not a security, but rather the actual transactions involved. The hearing for the SEC’s case against Binance was delayed to Monday due to snow in the Washington, D.C. area. Furthermore, an interesting hearing occurred before the U.S. Supreme Court, challenging a longstanding Supreme Court precedent known as the Chevron doctrine, providing regulatory agencies with latitude to interpret federal laws for rulemaking purposes. This could be significant for the future of cryptocurrency legislation and Federal regulation.
Wednesday
- 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, which focused on guidelines for preventing illicit crypto activities.
- 15:00 UTC (10:00 a.m. EST) There was a hearing in SEC v. Coinbase.
Friday
- 15:00 UTC (10:00 a.m. EST) There was going to be a hearing in SEC v. Binance, but it was delayed to Monday due to snow in Washington, D.C.
- (Axios) Brady Dale and Crystal Kim, alongside several of their colleagues at Axios, created this delightful timeline chronicling the bitcoin ETF saga.
- (The Air Current) TAC created a reading list of stories that perhaps provide an explanation for how Boeing began this year by watching a deactivated emergency exit door blow off an aircraft during flight (Disclosure: I’m invested in Boeing shares).
- (IRS) The Internal Revenue Service has said that a controversial component of the 2021 bipartisan Infrastructure Investment and Jobs Act that modified Section 6050I of the U.S. code to require business to report related crypto transactions in excess of $10,000 will not take effect until the Treasury Department publishes some regulations around that. The reporting requirement is in effect for cash transactions exceeding that amount.
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