Coinbase is capitalizing on the momentum generated by Judge Amy Berman Jackson’s recent ruling in the case of the United States Securities and Exchange Commission (SEC) versus Binance. The exchange is citing her decision, which reinforces the precedent that secondary sales of Binance’s BNB token do not fall under the category of securities sales according to the criteria outlined in the Howey test.
In a letter, Coinbase’s attorneys accused the SEC of engaging in arbitrary rule-making without a consistent framework. They argued that the SEC has never provided a coherent explanation of its regulatory process and is now attempting to retroactively impose it on the digital asset industry through an aggressive enforcement campaign.
Coinbase has taken legal action against the SEC and the Federal Deposit Trust Corporation, alleging that both agencies conspired to exclude the crypto industry from the banking sector. The company claims that the government agencies violated the Freedom of Information Act by failing to provide industry participants with documentation related to their rule-making discussions regarding Ethereum’s transition to a digital asset ecosystem secured by staking.
This is not the first time that the SEC’s classification of Ether (ETH) has come under scrutiny. In 2018, SEC Corporation Finance Director William Hinman stated that ETH was not a security because of the sufficient decentralization of its smart contract protocol. Hinman’s statement later became a central argument for Ripple Labs, who claimed that the SEC unfairly labeled their XRP token as an unregistered security without clear criteria for defining the term “securities contract.”
These missteps by the SEC have received criticism from within the agency itself. SEC Commissioner Mark Uyeda has described the agency’s treatment of the crypto industry as problematic.
Judge Jackson’s ruling in the SEC v. Binance case reinforces a previous precedent set by Judge Analisa Torres in the SEC v. Ripple Labs case. Judge Torres determined that secondary sales of XRP did not constitute the sale of unregistered securities because the digital asset did not meet the SEC’s criteria for being classified as an investment contract.
However, Judge Torres also ruled that initial sales of XRP to institutional investors did qualify as securities sales, not because of the characteristics of the token itself, but because of the manner in which the sales were conducted.
According to a magazine, a significant number of new Base memecoins are scams, with 91% of them having vulnerabilities.