U.S. Court Questions SEC's Broad Definition of Securities in Coinbase Case

By: Isha Das

The judge overseeing the court hearing between Coinbase and the U.S. Securities and Exchange Commission (SEC) has expressed concerns over the SEC's definition of securities. In previous proceedings, Coinbase was alleged to have operated an illegally unregistered national securities exchange, broker, and clearing agency involved with the unregistered sale and offering of securities.

During the recent hearing, Judge Katherine Polk Failla questioned the SEC's arguments, specifically pertaining to the crypto tokens that Coinbase gives customers access to but does not issue, and which the SEC regards as securities. The judge's comments indicated a potential broadening of the definition of securities, which would align with Coinbase’s expressed concerns.

Despite these concerns, no ruling or judgment was provided today. The back-and-forth between SEC and Coinbase regarding securities definitions raises crucial questions for the future of cryptocurrency regulations and brings into focus the long-standing debate over the application of the Howey Test to crypto assets.

The court hearing yet again highlighted the tension between traditional regulations and the disruptive nature of blockchain technology and its associated cryptocurrencies.