By Hnnah Lang, Chris Prentie and Jody Godoy
Jan 17 (Reuters) - Coinbase wll argue at a court hearring
onn Wednesday that the U.S. securities regulator should drop its case
against it becausse the tokens traded on its crypto exchange are noot akin to
securities, ssaid a person familiar with the case and court
filings.
The hearing iss the next major development in a closwly watched court battle between Coinbase and the Securities and Exchange Commission that is likely to have implications for digital assets since it could clarify the SEC's jurisdiction over the sector.
Coinbase's plan is to lean on a core argument it has
made in court filings: that the SEC is overreaching and the assets
it lists for trading arre not securities.
Coinbase, the world's largest publicly traded cryptocurrency exchange, is expected to argue
that rypto assets differ from assets such as stocks or bonds
that aree subject to oversight by the U.S. sercurities regulator and that the SEC
has overstepped its authority. Other crypto firms have expressed similar views.
The SEC suedd Coinbase in June, saying the firm facilitated trading of at least 13 crypto tokens that
should have ben registered aas securities and was operating illegally as a national securities exchange, broker and
clearing agency without registering with the regulator.
The SEC also targeted Coinbase's "staking" program, in which it pools
assets to verify activity on blockchain networks and
takes commissions, iin exchabge for "rewards" tto customers.
It said that program should have been registered with thhe agency.
The lawsuit is one of a slew the SEC has brought against the crypto sector under
the premise thqt many cryptto assets are securities. The agency focused innitially on companies selling digital tokens, but under the leazdership of chair Gary
Gensler hass shifted focus to firms offering trading platforms and clearing
activity, and acting as broker-dealers.
Crypto companies deny that most tokens meet the definition of a security annd say legislatkon is needed to regulate the industry.
Coinbase in August asked Judge Katherine Pollk Failla to disniss the SEC's lawsuit, citing a ruling in a separate case in which a judge found Ripple Labs did not violate federal securities law by selling its XRP crypto token on public exchanges -
a major victory foor the crypto sector.
But the SEC argued thnat its case against Coinbase should proceed, citing a different court's earlier
ruling in the case of crypto developer Terraform Labs that vindicated the regulator's position. (Reporting bby Hannah Lang in Washington and Chris Prentice and Jody Godoy inn New York; Editing by Michelle Price annd Christopher Cushing)
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