Key Takeaways
- Coinbase’s attorney urged the judge to reject the SEC’s classification of crypto sales on the secondary market as securities contracts, stating the judgment should carry “no weight” in the SEC vs Wahi case.
- Wahi defendants claim that the tokens were not “investment contracts” and thus outside of SEC jurisdiction.
Coinbase’s legal battle with the U.S. Securities and Exchange Commission (SEC) has taken another turn as the cryptocurrency exchange challenges a previous judgment that classified secondary sales of crypto assets as “securities transactions.” Lawyers representing Coinbase have urged the presiding judge, U.S. District Judge Katherine Failla, to disregard this judgment, arguing that the issue was not adequately examined in court.
In a letter dated March 5, Coinbase attorney Michael Savitt called on Judge Failla to reject the SEC’s classification of crypto sales on the secondary market as securities contracts. Savitt emphasized that the judgment from the SEC vs Wahi case, which deemed these sales as securities transactions, should carry “no weight” in Coinbase’s legal proceedings.
The SEC’s lawsuit against Coinbase stems from events in July 2022 when the regulator sued former Coinbase product manager Ishan Wahi, his brother Nikhil Wahi, and their friend Sameer Ramani for insider trading related to nine cryptocurrencies.
Although the Wahi defendants moved to dismiss the case, arguing that the tokens were not “investment contracts” and thus outside of SEC jurisdiction, the SEC settled with them in June 2023 in a “zero-dollar, no-admit-no-deny” settlement.
However, the SEC obtained an unopposed default judgment against Ramani, who did not appear for the case. Savitt contended that this judgment should be disregarded, as crucial issues were not properly examined or argued in court.
He stated, “The Wahi order was procured against an empty chair and its reasoning reflects as much. Coinbase respectfully submits that the default judgment against Mr. Ramani should be afforded no weight.”
Coinbase’s response comes after the SEC’s attempt to inform the court of the default judgment made in the insider trading case involving Ramani. The SEC argued that this judgment was relevant because it deemed the tokens as securities, a position contested by Coinbase.
The legal dispute between Coinbase and the SEC intensified in June 2023 when the SEC sued Coinbase, alleging violations of federal securities laws related to the listing of 13 tokens considered “securities.” The lawsuit also targeted Coinbase’s “staking” program, raising concerns about unregistered securities.
