- Federal judge ruled SEC’s lawsuit against Coinbase alleging it operates as an unregistered securities exchange can proceed, rejecting Coinbase’s motion to dismiss
- Judge found SEC’s claims against Coinbase are largely plausible, indicating support for SEC’s view that many crypto assets are securities
- Case now moves to discovery phase; ruling seen as potential trouble for Coinbase and crypto industry’s battle with regulators
A federal judge overseeing the US Securities and Exchange Commission’s (SEC) sweeping lawsuit against Coinbase ruled Wednesday that the regulator’s arguments against the crypto exchange are largely plausible, permitting the case to proceed and denying Coinbase’s motion to dismiss it in its entirety. This ruling allows the SEC’s case against Coinbase alleging it operates as an unregistered securities exchange to move forward.
Ruling on Motion to Dismiss
Rulings on motions to dismiss are not resolutions of factual disputes. When evaluating such motions, federal judges only dismiss a case if there is not plausible evidence that a law has been violated, even when assuming all facts alleged by a plaintiff to be true.
In the ruling, Judge Kathleen Failla not only found most of the SEC’s claims against Coinbase fit for trial but also indicated support for the agency’s broader long-standing argument about crypto—that many tokenized assets constitute securities schemes and fall under the SEC’s purview.
Reactions from Coinbase and the Crypto Industry
On Twitter, Coinbase Chief Legal Officer Paul Grewal wrote that he was not surprised by the ruling, stating that early motions like theirs against a government agency are almost always denied. He added that clarity is the ultimate goal and today’s decision continues Coinbase on that path.
The crypto industry sees this as a sign of trouble ahead not just for Coinbase but also for the broader ongoing battle against federal regulators. Judge Failla rejected Coinbase’s claim that the SEC has violated federal law by failing to disclose its crypto policy. She wrote that the SEC is simply engaging in a fact-intensive application of an existing standard to determine whether certain crypto transactions are securities.
What Happens Next
The SEC’s case against Coinbase now proceeds to discovery. Both parties have been instructed to submit proposed case management plans by April 19. While Coinbase plans to continue fighting the SEC’s claims, this ruling permits the regulator’s arguments that the exchange violated securities laws to move forward.
