Key Insights:
- SEC’s arguments against Coinbase are considered weak by crypto lawyer Murphy.
- Coinbase’s defense leverages Major Questions Doctrine for a potential victory.
- Swift resolution is expected due to Coinbase’s expedited legal strategy.
In an unfolding drama, the U.S. Securities and Exchange Commission (SEC) outlines its case against Coinbase. The crypto giant is in hot water, accused of potential infringements of securities laws.
Yet, crypto lawyer James Murphy, popularly known as MetaLawMan, deems the SEC’s arguments “not particularly strong” on Twitter. Murphy speculates that Coinbase may even emerge victorious in the legal skirmish.
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SEC’s Approach – Lacking Conviction?
On July 7, the SEC outlined its impending case against Coinbase in a letter addressed to the presiding judge. The SEC posits that Coinbase knowingly flouted securities laws by proceeding with its operations despite engaging a team of adept lawyers. A clear illustration, the regulator insists, is that Coinbase consciously overlooked the legal implications of its activities.
However, Murphy counters this standpoint, arguing that the SEC’s assertions hold little weight. Specifically, he critiques the SEC’s reliance on the SEC v. LBRY case as a supporting point for their arguments. In this prior case, which the SEC successfully won in November 2022, LBRY, a token issuer, faced charges of dealing in unregistered crypto securities.
As per reports, the regulator draws on this case to emphasize that crypto security remains such, regardless of whether it is traded directly by the issuer or on a secondary platform such as Coinbase. Nonetheless, Murphy highlights a flaw in the SEC’s reasoning.
He points out that the LBRY case judge did not declare that tokens traded on secondary platforms constitute securities. Consequently, Murphy concludes, the LBRY case does not convincingly reinforce the SEC’s argument.
“Despite the SEC’s efforts to oppose the motion, it’s improbable they’ll delay consideration of the issues raised by Coinbase,” Murphy said.
Thus, he notes, there’s hope for a swift resolution in favor of Coinbase.
The Major Questions Doctrine – A Strong Defense for Coinbase
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One of the most notable elements of Coinbase’s defense strategy is the employment of the Major Questions Doctrine. This legal principle, rooted in the Supreme Court’s rulings, dictates that a regulatory agency must secure explicit authorization from Congress to address issues of considerable national significance.
As a result, Coinbase harnesses this doctrine to underscore the SEC’s lack of congressional endorsement for its actions. Their defense is fortified by SEC chief Gary Gensler’s testimony before Congress in May 2021. At that time, Gensler admitted the SEC lacked the legal power to supervise crypto exchanges, thereby leaving any regulatory voids to be filled by Congress alone.
The SEC, as Murphy argues, will likely attempt to nullify Coinbase’s defense based on the Major Questions Doctrine. Nevertheless, he predicts that their efforts will prove futile. “Coinbase’s chances of prevailing in the Major Questions Doctrine argument, either at the district court level or on appeal, appear high,” says Murphy.
In conclusion, the hearing for this case is scheduled for July 13, and as per Murphy’s perspective, Coinbase’s tactic to expedite the proceedings is effective. This could mean a swift resolution for the case, potentially favoring Coinbase. As this case unfolds, it may serve as a crucial reference point for the evolving landscape of crypto regulation.
