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I broke down the Coinbase-SEC court ruling yesterday and noted it would take some time to sort out its broader implications.
One legal pro’s viewpoint suggests the decision could be a final straw of sorts to force long-anticipated regulatory clarity.
Monday’s court decision was not exactly surprising, according to Arie Heijkoop, a partner in Haynes Boone’s investment management practice group. The SEC’s response to Coinbase’s petition “was lacking in any substance,” he explained; but a court ordering an agency to issue a new rule has a high bar.
That said, Heijkoop told me the opinion’s descriptive language (exhibiting increased understanding of the space) suggests “the SEC may be running out of room to continue evading coming out with a defined position on crypto and digital asset regulation.”
Indeed, Judge Stephanos Bibas notes the SEC’s “old regulations fit poorly with this new technology, and its enforcement strategy raises constitutional notice concerns.”
Bibas’s concurring opinion, in particular, seems to implore the SEC to distinguish the coins that operate more like securities from those that do not, Heijkoop explained.
“As the number of crypto products, and how they function, proliferate, if there will ever be crypto regulation handed down, it will likely have to account for those differences,” the Haynes Boone partner added.
This ruling may provide some optimism to defendants to challenge crypto enforcement actions if there is no further SEC guidance. But handing down a new rule would be “a fairly seismic action,” Heijkoop said.
Further, SEC actions for unregistered securities offerings may not fully cease given the decision’s recognition of crypto products with securities-type characteristics.
Whether the agency’s new administration offers more guidance through regulation rather than litigation remains a key question.