motion-to-dismiss day
“Did Coinbase just win?”
We won’t know for (possibly) weeks, but given the tone of the hearing in Judge Katherine Failla‘s chambers, the SEC had weak arguments and Coinbase was nimble and prepared at yesterday’s Motion-To-Dismiss (MTD) hearing in the Coinbase complaint brought by the Securities and Exchange Commission (SEC) in June.
Court observer Kevin Paffrath of ehack.com covered the nearly 5-hour hearing and thinks there’s a 90% chance that Coinbase has won its MTD – he started the day thinking the exact opposite given that MTDs are often unsuccessful. See Paffrath’s written summary.
Even better, hear his audio-only broadcast of the hearing with commentary.
Available by teleconference, it should be noted how informative the hearing’s public discussion on digital assets was – particularly on The Howey Test, the Holy Grail of securities regulation.
Helpful amicus briefs submitted to the Court in support of Coinbase were brought up throughout the hearing, too. DeFi Education Fund’s brief (PDF) was highlighted by the Judge for its definitional value around wallets and staking, for example.
In that vein, at 1:36:10 of the ehack.com broadcast, Judge Failla, who was appointed by President Barack Obama in 2013, recalls how she had a discussion with Senator Chuck Schumer (D, NY) during her confirmation for the bench that stressed the importance of NOT being an activist judge. Pointing to the amicus brief submitted by Senator Cynthia Lummis (R, WY) in support of Coinbase – see it (PDF) – Judge Failla appeared to feel a “moment of truth” around proving she wasn’t an activist and should “stay in her lane.” Yet, the Judge told the courtroom she could feel Lummis saying, “Don’t do this Failla” and expressed a measure of deference to the Senator.
Reviewing the hearing, crypto counsel James Murphy (a.k.a. MetaLawMan on X) was less sanguine post-hearing on Coinbase’s MTD succeeding. He said, “My guess (and it’s just a guess) is she is going to allow the case to go forward to discovery, like the Ripple case. But, I continue to believe, as noted in my pinned tweet, that Coinbase will ultimately win the case in the end. Congress, of course, could put a stop to the whole thing with adoption of comprehensive crypto legislation but that won’t happen this year.” Read his thoughts.
what you should know: Now, we wait for the Judge’s decision. FWIW, Judge Failla dismissed a case in August against Uniswap by a mysterious collection of six individual investors. Around the same time in a separate DC court, Grayscale won its case against the SEC that got the Bitcoin spot market ETF ball rolling.
Overall, a loss in this case by the SEC would be huge for digital assets and though it could appeal, and appeal, the courts will have spoken on the SEC’s generalized claim that all crypto are securities, let alone other areas of dispute. And the spotlight would be even brighter on Congress to produce a regulatory framework. Continue reading “Coinbase Motion-To-Dismiss Hearing Buffets SEC Counsel; Banking Chair Brown Sees AML Legislation Soon-ish”
