On Wednesday, Judge Failla from the Southern District Court of New York denied Coinbase’s motion to dismiss the Securities and Exchange Commission’s (SEC) case against the exchange. The SEC accuses Coinbase of operating as an unregistered exchange, broker, clearing agency, and alleges that its Staking Program engages in the unregistered offer and sale of securities.
Ripple CLO Remains Optimistic
Despite this setback for Coinbase, Ripple’s Chief Legal Officer, Stuart Alderoty, suggests that this legal battle is only in its initial stages.
Alderoty remarked via X (formerly Twitter), “A quick knock out punch would have been nice, but at the end of the day, the wheels of justice move slowly, eventually siding with the good guys. The CB Judge gave the SEC the benefit of doubt at this early stage – as she must. This is far from over.”
His comments echo the sentiments of Coinbase’s Chief Legal Officer, Paul Grewal, who also took to X to express his views: “Today, the Court decided that our SEC case will move forward on most of the claims, but dismissed the claims against Coinbase Wallet. We were prepared for this, and we look forward to uncovering more about the SEC’s internal views and discussions on crypto regulation. […] Looking ahead, we remain confident in our legal arguments and are eager for the opportunity to take discovery from the SEC for the first time.”
What’s Next For Coinbase Vs. SEC
The question of what lies ahead for Coinbase in the aftermath of Judge Failla’s ruling has been a topic of considerable interest. Eleanor Terrett, a journalist with FOX Business, shed light on the subsequent steps: “NEW: So what’s next for Coinbase following Judge Failla’s ruling? The Court will set a full discovery schedule and each side can request documents for the discovery process.
Terrett added, “Sources familiar tell me: ‘Some of this case could be undermined and exposed through discovery so Coinbase will attempt to get as much discovery on the SEC as they can during this process, and the SEC will do the same.’”
She also drew parallels to the discovery process in the Ripple case, which provided unprecedented insights into the SEC’s internal viewpoints on Ripple and the broader cryptocurrency market. The process of discovery, summary judgment brief filings, and the possibility of a trial suggests that the legal proceedings between Coinbase and the SEC will extend well over a year.
In the interim, Coinbase might explore the option of filing an “interlocutory appeal” against some or all parts of the motion to dismiss denial, based on the strategic judgment of its legal team. This route was previously attempted by the SEC in the Ripple case following Judge Torres’s summary judgment decision, although it was ultimately unsuccessful due to the stringent criteria for interlocutory appeals prior to final judgments.
Carlo.eth, a prominent member of the Ethereum community and defense lawyer, commented on the strategic importance of the discovery phase for Coinbase: “I think Coinbase welcomes the chance at full discovery to get a good look under the SEC’s hood. Will likely give them a lot of momentum going into the summary judgment phase.”
At press time, COIN traded at $256.7, down roughly -9% since the news broke.
Featured image from YouTube/ Minority Corporate Counsel Association, chart from TradingView.com