District Judge Katherine Polk Failla heard arguments from attorneys for the SEC and
Coinbase for five hours on Jan. 17. Cointelegraph has a rundown of the hottest topics.
United States District Judge Katherine Polk Failla has heard arguments from the Securities and
Exchange Commission (SEC) and Coinbase on the crypto exchange’s motion for dismissal of a lawsuit filed by the regulator in June 2022.
The hearing was held for nearly five hours and provided an extensive overview of the key
arguments in courts regarding the crypto space, assets and the SEC’s role in regulating the industry.
During the hearing, Judge Failla critically examined the regulator’s case against the crypto
exchange, asking the SEC attorneys to explain why a digital token issuance would meet the Howey test, arguing the case was “too broad.”
In the SEC’s view, buyers of tokens are also investing in the network or ecosystem behind it,
indicating there is a value proposition behind a token purchase.
Coinbase’s attorneys, however, challenged the argument, claiming that Bitcoin — described as a commodity by an SEC attorney during the hearing — is also backed by a community and has a network.
Judge Failla delved into the definition of staking and secondary market transactions,
as well as recent court rulings involving crypto firms, such as the Ripple and Terraform Labs case. Cointelegraph has summarized the hearing’s hottest topics below.
Coinbase is trying to create a different Howey test, says SEC
Attorneys representing the SEC argued that the exchange is trying to create a different version of
the Howey test while allowing trade of crypto tokens that offer holders access to ecosystems that the regulator described as a “common enterprise.”
The SEC argued that the exchange independently conducted the Howey test,
leading to differing interpretations regarding the status of certain tokens.
This discrepancy in conclusions over the tokens regarding the test, according to the SEC,
provides sufficient grounds to reject the motion and allow the case to proceed.
“We think they’re making up a new test, and we believe that our position is the one that’s most
faithful and consistent, but in fact, compelled by the Howey test. It’s not just a plausible reading, as they claim it is.”