The conference, which is the first hearing since the SEC’s June 6 announcement, is anticipated to be “procedural and administrative,” though it might also provide a sense of how the litigation will go.
Legal experts believe that the pre-motion hearing, which is scheduled for July 13 and involves the U.S. Securities and Exchange Commission (SEC) and cryptocurrency exchange Coinbase, will provide insight into the nature of the dispute and any potential repercussions for the larger crypto business.
Prior to the start of the trial, either side may request a decision at this conference, which was initially scheduled for August. In this instance, Coinbase filed the motion in late June to have the regulatory body’s June 5 lawsuit dismissed.
Related: Coinbase Shares Up 50% despite SEC Lawsuit
Key Insights into the Hearing and Coinbase’s Defense
Legal experts anticipate that the future hearing will primarily center on procedural and administrative issues, including a securities and regulatory attorney. Coinbase is anticipated to make arguments that support the early dismissal of the case on a number of reasons, including the claim that the in dispute tokens do not meet the Howey test for securities, undermining the SEC’s capacity to exercise jurisdiction over them.
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The SEC harshly slammed Coinbase in its response to the request on July 7. It said that the exchange disregarded long-standing legal standards established by the Howey test and was aware of potential securities law violations. The SEC asserted that Coinbase is making an effort to develop its own standards for classifying investment contracts.
In support of itself, Coinbase mentions its 2021 initial public offering (IPO). The exchange claims that the SEC’s accusations are a result of actions that were fully disclosed and explained to the agency as well as to the general public in years prior.
However, even being aware of Coinbase’s commercial activity might not be enough to win the case in court. Corporate and securities attorney Roland Chase claims that disclosure requirements are the main emphasis of the federal securities regulations controlling the IPO process. In order to assure improved transparency to potential investors, Chase noted that the SEC’s authority, as granted by Congress, is to evaluate the IPO materials, offer comments, and pose questions.
Related: SEC Claims Coinbase Knew It Was Violating Securities Laws
Chase noted that during the IPO process, Coinbase had notified the SEC that it would thoroughly examine each asset before letting it to be traded on its platform, guaranteeing compliance with securities laws. He emphasized that after finding comfort in the company’s disclosure, the SEC eventually approved Coinbase’s IPO. The SEC is now claiming that Coinbase is providing unregistered securities of its own while also trading securities on its platform.
The legal proceedings could last for several years if the parties are unable to come to a settlement, simulating the protracted legal dispute between Ripple and the SEC that started in 2020. The SEC also deemed Ripple’s XRP coin to be a security.
Brad Garlinghouse, the CEO of Ripple, accused the SEC of purposely causing regulatory confusion and capitalizing on that misunderstanding through enforcement proceedings in a recent video addressing the continuing case.