The ongoing case between the United States Securities and Exchange Commission (SEC) and Coinbase, has taken the crypto industry by the storm. In a recent turn, a crypto lawyer has sided with the exchange, deeming SEC’s arguments as not so strong.
In a tweet, James Murphy, a renowned crypto lawyer going by the name of MetaLawMan with over 22,000 followers, said that the SEC’s arguments are “not particularly strong.” The lawyer’s comment come after the SEC submitted a preview of the arguments it intends to use against Coinbase in a letter to the judge on July 7.
According to the SEC, Coinbase intentionally violated and was had acknowledged its acceptance to adhere to the federal securities laws. The SEC had submitted its letter in response to Coinbase seeking permission to file a motion for judgment on pleadings on June 28. The regulator has also said it will oppose any such motion if the court permits Coinbase to file. To this, Murphy stated:
“While the SEC will oppose the motion, it will not try to delay consideration of the issues raised by Coinbase. This means there is at least some hope of a prompt resolution of the case.”
Further, explaining the reason to his implication of the “weak arguments,” Murphy cites the example of the case of SEC versus LBRY which SEC used in its last week filing among a few others. The lawyer also targeted Gensler and called out his recent approach to crypto contradictory his previous stances as one of the reasons. He explains that the testimony of Gensler is going to play a very important role and can also make the case hectic for the regulator.
As per the SEC’s letter, in the SEC versus LBRY case, the court drew no difference between investors who bought crypto directly from the issuer and those who purchased it on a secondary trading platform.
The regulator uses the case to support its argument that a crypto security does not cease to be a security simply because it’s being traded on a secondary platform like Coinbase. However, according to Murphy, the judge in the cited case did not rule that tokens traded on secondary platforms are securities.
Therefore, Murphy believes the case does not sufficiently support the SEC’s argument. He noted:
The SEC relies on an inapplicable case out of Connecticut that was brought against the issuer of a token–not against a secondary trading platform.
Towards the end, Murphy said that the regulator may come up with “better case law” during the full briefing, but “this is not signaling strength.” The case has been a big highlight for the crypto sector amid the regulator’s crackdown on the largest crypto entities.
After the Wells Notice from March, on June 6th, the SEC filed charges on for violating federal securities laws and operating without a license. It alleged that the platform was operating as an unregistered broker, clearinghouse and exchange all in one go, having listed at least 13 different cryptocurrencies that are unregistered securities.
Following this, Coinbase had retaliated with narrow legal action. After several hearings and allegations, the court ordered that SEC to respond to Coinbase’s initial legal defense on July 13. The hearing date had been moved up due to a defense tactic used by Coinbase, in which the exchange filed its initial answer 40 days before the deadline of Aug. 7.
While Coinbase has shown optimism and courage in the wake of the recent lawsuit, the crypto community has often targeted the SEC for being anti-crypto. Previously, another renowned crypto lawyer had commented on the ongoing case and suggested it to be turned to amicus curiae for the benefit of larger crypto industry. However, as the case further proceeds, more clarity regarding the case would unfold.