Report: Dismissal of SEC Lawsuit Against Coinbase Could Be Decided by Spring

The SEC’s suit against Coinbase could be decided in the next three months.

The Securities and Exchange Commission (SEC) sued the cryptocurrency firm last year, and Coinbase went to court last week seeking to have that suit dismissed. 

The judge in that case is likely to make a decision on the dismissal in the next three months, SeekingAlpha reported Sunday (Jan. 21), citing a Citi analyst.

“Given the stature of the case, we agree with the notion that this dispute is unlikely to be solved on motions alone — likely pushing the summary judgment phase >1 year,” Citi analyst Peter Christiansen wrote in a note. “We remain neutral/high-Risk purely on regulatory risk, given any potential ruling can have a significant impact on the company’s future.”

The SEC sued Coinbase in June, accusing the company — the largest cryptocurrency firm in the U.S. — of operating as an unregistered exchange. 

In court last week, the company asked Judge Katherine Polk Failla to dismiss the case, though the judge adjourned proceedings without issuing a ruling.

The note by Citi’s Christiansen outlines a few possible outcomes. Assuming the judge lets the suit stand, it will likely trigger a discovery phase that lasts at least a year before reaching summary judgment.

Polk Failla could grant the dismissal motion with prejudice, though the SEC could appeal. The judge could also dismiss the suit without prejudice, allowing the SEC to amend its complaint. Finally, the court would grant Coinbase’s motion in part, dismissing just part of the SEC suit.

As PYMNTS wrote last week, Coinbase has argued that the tokens traded on its exchange should not be considered securities under SEC jurisdiction. William Savitt, the company’s attorney, stressed that buyers of these tokens do not acquire any rights associated with their purchases, unlike traditional stocks or bonds.

“It’s the difference between buying Beanie Babies Inc. and buying Beanie Babies,” Savitt said. 

The question of whether digital tokens should be considered securities has been a contentious issue in the courts. In a similar case centered on Ripple Labs’ XRP token, a federal judge ruled that the token was not subject to SEC jurisdiction. Coinbase is urging the judge in its case to look to the Ripple decision and dismiss the SEC’s lawsuit.