Coinbase Petition to Second Circuit: Trades on Our Platform Do Not Trigger Federal Securities Laws

Coinbase Asks Appeals Court to Say Crypto Trade Unlike Stock

Coinbase Inc. asked the Second Circuit to say that digital token trades on its platform aren’t transactions governed under federal securities law.

“There is no more pressing issue in securities law today than the scope of the Securities and Exchange Commission’s authority to regulate secondary trades of digital assets,” Coinbase said in its petition docketed in the US Court of Appeals for the Second Circuit. The appeals court could “clear away the cloud that currently hangs over the cryptocurrency market,” it said.

A Second Circuit decision finding that token trades aren’t securities transactions would speed the end of the SEC’s case against Coinbase, and loosen US crypto regulation following agency actions during the Biden administration. The Trump administration has indicated it’ll give crypto companies more regulatory leeway.

SEC-CFTC Merger Debate Revived as DOGE Looks to Trim Agencies

Lawmakers for decades failed to advance legislative proposals to harmonize or merge the agencies, in part due to wrangling among the various committees overseeing them. But the Trump administration’s stated goals of increasing government efficiency and providing clear rules of the road for crypto players offer a new chance for the regulatory tie-up to gain traction.

“If it doesn’t happen now, it’s fair to assume it’ll never happen,” Reiners said.[…]

Trump’s pick to lead the SEC, Paul Atkins, told the House Financial Services Committee in 2015 that the authors of the 2010 Dodd-Frank Act blew a “once-in-a-lifetime opportunity to streamline our crazy quilt of financial services regulators” by failing to merge the SEC and CFTC.

Crypto industry watchers and merger proponents are hoping Musk, with Trump’s blessing, will give new life to the idea.

President Trump, Crypto Billionaire

Mr. Trump has created a regulatory nightmare for Paul Atkins, his highly qualified nominee to run the SEC. Mr. Atkins was crypto-friendly long before his nomination, but now any regulatory move he takes that the industry supports will be attacked as helping Mr. Trump’s business. The Trump tokens might hurt the crypto industry by making it all look like a get-rich-quick scheme.

Mr. Trump’s $TRUMP website includes the disclaimer that the tokens are “intended to function as a support for, and engagement with the ideals and beliefs embodied by the symbol ‘$TRUMP’” and “are not intended to be, or to be the subject of, an investment opportunity, investment contract, or security of any type.” That disclaimer won’t stop lawsuits.

If the token’s price drops, buyers who lose money could argue that Mr. Trump failed to make required securities disclosures about the risks. Democratic state Attorneys General could seek restitution for investors. If Mr. Trump hypes the token at a press conference, they might even charge him after he leaves office with market manipulation since he isn’t immune from prosecution for unofficial acts.