- Coinbase claims crypto is a collectible
- The SEC considers it equivalent to buying shares with profit expectation
Crypto exchange Coinbase and the US Securities and Exchange Commission met in court again this week to present their divergent views before a federal judge on digital assets being or not being securities. According to Coinbase, cryptocurrencies are like Beanie Babies, more similar to collectibles than shares, The Guardian reported.
Coinbase asked the court to dismiss the SEC’s lawsuit. The regulator accused the exchange of selling unregistered securities, claiming the firm enabled trading of more than a dozen cryptocurrencies. According to them, buying a token was the same as buying into its issuer’s company.
Is crypto an investment contract?
SEC claims that crypto is like an investment contract in that it supports a larger “enterprise.” Judge Katherine Polk Failla did not rule on the matter, saying some questions remained unanswered despite the more than four-hour-long session.
Setting a precedent
Her decision is likely to set a precedent, including by clarifying the SEC’s jurisdiction over the crypto industry. The case is one of many the regulator has brought.
The jury is still out on what constitutes a security, both literally and figuratively speaking. The expectation of profit is a key factor in determining the essence of crypto. Most crypto industry representatives maintain that crypto does not meet that definition of an investment contract.
However, lawyers for the SEC beg to differ, arguing that securities are not like buying collectibles such as Beanie Babies. Beanie Babies were stuffed animals that saw immense popularity in the 1990s, when people expected their value to skyrocket.
Future implications
Judge Failla expressed concern that the SEC was asking her to “broaden the definition of what constitutes a security”. In its lawsuit, the regulator also objected to Coinbase’s staking program, which involves pooling assets to verify blockchain activity.
The exchange charged a fee in exchange for rewards to its users. According to the SEC, Coinbase should have registered the staking program with the agency.
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