The Securities and Exchange Commission (SEC) is meeting Coinbase today in federal court, with both parties presenting their first oral arguments amid their industry-defining lawsuit.

Back in June, the market regulator sued Coinbase for listing a handful of “crypto-asset securities” on its trading platform while failing to register as a securities exchange.

Unlike other crypto firms that have succumbed and agreed to pay a fine when faced with SEC legal pressure, Coinbase has defended itself.

In August, the exchange argued that it lists no securities at all and that the regulator has a warped interpretation of how crypto assets relate to securities law.

Furthermore, in approving its S-1 application form to list on national securities exchanges, Coinbase claims the SEC had implied that its business operations were by the law.

COIN is down 16% since the beginning of January – partly due to the SEC’s reluctant approval of Bitcoin spot ETFs, which have sucked investor capital away from other crypto-related companies and products.

Coinbase’s Odds Against The SEC

SEC chairman Gary Gensler explained last week that his agency’s approval of such funds was largely a response to its unfavorable ruling in another crypto-related case with Grayscale last year.
At the time, the court determined that the SEC hadn’t provided consistent reasoning for why it had previously approved Bitcoin future ETFs, but was rejecting spot ETFs.

Upon approving the ETFs, Gensler emphasized that he was respecting the law and the court’s directive.

That said, the agency’s ruling would “in no way signal the Commission’s willingness to approve listing standards for crypto asset securities.”

He added:

“Nor does the approval signal anything about the Commission’s views as to the status of other crypto assets under the federal securities laws or about the current state of non-compliance of certain crypto asset market participants with the federal securities laws.”

Experts have predicted that Coinbase is unlikely to secure an outright dismissal of the SEC’s case. In fact, the company could lose up to 30% of its revenue if forced to segregate some of its multifaceted services into different buckets, including trading, staking, and custodianship.

This might be closer than I originally thought.

Back in August 2023 the Coinbase judge dismissed a lawsuit against Uniswap for sale of “scam tokens.”

Admittedly the decentralized nature of the exchange played a large role (which we don’t have in the Coinbase case). BUT… pic.twitter.com/ZYnIB5AUzJ

— Jeremy Hogan (@attorneyjeremy1) January 15, 2024

Judge Katherine Polk Failla, who is overseeing the case, already has experience within the crypto realm. In August, she dismissed a class-action case against decentralized exchange Uniswap arguing that Ether (ETH) is a commodity.

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