Coinbase’s legal team has requested the judge overseeing its legal dispute with the U.S. Securities and Exchange Commission (SEC) to disregard a previous ruling that classified secondary sales of crypto assets as “securities transactions.” The lawyers argue that this judgment was never properly examined in court.
In a letter dated March 5, Coinbase attorney Michael Savitt urged U.S. District Judge Katherine Failla to reject the SEC’s classification of crypto sales on a secondary market as securities contracts in the SEC vs Wahi case, stating that the ruling should not carry any weight.
The SEC had filed a lawsuit against former Coinbase product manager Ishan Wahi, his brother Nikhil Wahi, and their friend Sameer Ramani in July 2022, accusing them of insider trading involving nine cryptocurrencies. The Wahi defendants had moved to dismiss the case, claiming that the tokens were not “investment contracts” and therefore fell outside the SEC’s jurisdiction. Coinbase and others supported this motion by filing briefs.
However, before the court could make a decision on the motion, the SEC reached a settlement with the Wahi brothers in June 2023, with a “zero-dollar, no-admit-no-deny” agreement. The SEC later obtained a default judgment against Ramani, who did not appear for the case. The court accepted the SEC’s allegations that the crypto assets were “investment contracts,” despite the SEC rejecting this position in the Coinbase case.
Savitt argues that the judgment against Ramani, which was uncontested and lacked proper examination, should not hold any significance. This response from Coinbase’s lawyers comes after the SEC notified the judge on March 4, attempting to undermine Coinbase’s case by highlighting the relevance of the Wahi insider trading case, as the court had classified the tokens as securities at the time.
In January, Coinbase and the SEC debated whether the crypto assets traded on Coinbase’s platform met the Howey test for securities. Following the hearing, Bloomberg senior litigation analyst Elliott Stein predicted a 70% chance of the exchange securing a full dismissal in the lawsuit.
The SEC sued Coinbase in June 2023, alleging that the cryptocurrency exchange had violated federal securities laws by listing 13 tokens that it claimed were “securities.” Coinbase is seeking a court order to dismiss the case, questioning the SEC’s authority over crypto exchanges.
Magazine: Crypto regulation — Does SEC Chair Gary Gensler have the final say?