Court rejects SEC's claim that Coinbase Wallet is an unregistered broker

The SEC’s claim that Coinbase Wallet is an unregistered broker has been dismissed.

The U.S. Federal Court for the Southern District of New York rejected the U.S. Securities and Exchange Commission’s (SEC) claim that Coinbase Wallet was an unregistered broker. Additionally, Judge Katherine Polk Failla rejected an application to focus on the Coinbase cryptocurrency exchange’s staking procedures.

The judge ruled against Coinbase’s securities sales and offers under U.S. law. The SEC had previously filed a lawsuit against the company, alleging otherwise. The judge also said that Coinbase operates as an exchange, broker-dealer and clearing agency under federal securities laws. Through its pledge program, it engaged in unregistered offers and sales of securities.

The decision partially granted Coinbase’s motion to dismiss an SEC lawsuit alleging the company violated rules.

The court agreed that Coinbase had exercised its right to deny unregistered brokers’ claims by providing its wallet application to customers.

Court Documents

On June 8, 2023, the U.S. Securities and Exchange Commission (SEC) filed a legal complaint against Coinbase, accusing the cryptocurrency trading platform of acting as a broker without registration. The SEC believes that Coinbase violated financial regulations because it merged the three functions of brokers, exchanges and clearing agencies that are usually separate in traditional financial markets to operate without proper registration and supervision.

In addition, the SEC also paid special attention to the Coinbase Earn staking program, a service that allows users to earn income by staking cryptocurrency. The SEC believes that Coinbase illegally offered unregistered securities products through this process, which also violated federal securities laws. The SEC’s lawsuit aims to pursue Coinbase’s legal liability and protect the interests of investors by ensuring that cryptocurrency trading platforms comply with the same legal and regulatory standards as traditional financial markets.

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