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Coinbase faces another setback as the U.S. District Court for the Southern District of New York denies its motion to dismiss the SEC’s case against the company. It is a major Blow to Coinbase, while the SEC will get the upper hand. The real battle starts now and promises to be a prolonged legal battle. With Judge Failla denying Coinbase’s motion to dismiss the case, the lawsuit is now set to enter the discovery phase, where both parties can request documents and evidence.
In a recent statement, the SEC said that
We’re pleased that yet another court has confirmed, that the framework used to identify securities for nearly 80 years still applies to the term ‘crypto’, stating that the economic realities of a transaction determine whether a particular offering constitutes a security.
Coinbase to Follow Ripple’s Path
Since Coinbase has stepped into the discovery phase, it is believed that it will last several months and is crucial for revealing weaknesses in a case and providing insights into both sides’ strategies. Strategists see this as an opportunity for Coinbase to gather evidence that could potentially weaken the SEC’s case and lead to a favorable outcome. Like Ripple’s legal battle, the discovery period significantly influenced the result, allowing Ripple to defend against the SEC’s allegations successfully.
What Next?
Paul Grewal, representing Coinbase, expressed both disappointment and readiness following a court decision allowing most claims by the SEC to proceed while dismissing those against Coinbase Wallet. Grewal has asked for clear rules that apply to all digital assets. He also appreciated the court’s recognition that certain technology innovations like Coinbase Wallet don’t fall under US securities laws.
Despite the setback, Grewal remains confident in their legal arguments and looks forward to proving their stance, especially with the opportunity to gather evidence from the SEC for the first time. Meanwhile, Fred Rispoli pointed out the potential challenges ahead for Coinbase, citing parallels with the SEC’s case against Ripple.
However, the road ahead for Coinbase is not easy according to Eleanor Terrett. With the discovery phase expected to last for months, followed by potential summary judgment briefs and a trial, the legal proceedings could drag on for a year or more. In the meantime, Coinbase may explore options such as filing an interlocutory appeal to challenge the court’s ruling on the motion to dismiss.
But Coinbase faces uncertainty with interlocutory appeals, as seen in the SEC’s failed attempt with Ripple. Nevertheless, Coinbase remains committed to contesting the lawsuit vigorously in pursuit of a favorable outcome.