Crypto: Coinbase challenges the SEC in court - Howey Test questioned

The legal battle between the SEC and Coinbase reaches another turning point. A U.S. judge has indeed begun to question the foundations of cryptocurrency regulation in the United States.

Adjourned.

The @SECGov's summation of its argument (broadly) is that @coinbase is making up a new version of the Howey Test and that there can be no deviating from Howey as it was originally written.

The SEC lawyer said "The Congress of 1934 would be surprised that today…

— Eleanor Terrett (@EleanorTerrett) January 17, 2024

Crypto status: A U.S. judge asks for clarifications

After the Ripple case, it is now the turn of the legal battle between the SEC and Coinbase to attract the attention of the crypto community. Recently, it took a significant turn during a recent hearing.

Indeed, U.S. Judge Katherine Polk Failla is now calling into question the very foundations of cryptocurrency regulation in the United States. At the heart of the debate is the SEC’s alleged reinterpretation of the famous Howey test, a key standard used to determine the classification of assets as securities.

Judge Failla has expressly asked the SEC to provide clearer definitions of crucial terms such as “securities” and “staking.” This highlights the persistent ambiguity surrounding the classification of cryptocurrencies.

If Judge Failla’s position prevails, it could potentially mean that cryptocurrencies (including XRP) would not be considered as securities in the United States. Such development would constitute a major advancement in the recognition of crypto as a separate asset class.

Decryption: crypto would escape the strict regulations applicable to traditional securities.

The SEC retaliates by issuing a warning to Coinbase

In the heat of the crypto battle, the SEC warns Coinbase not to alter the Howey test. According to the American crypto regulator, any modification would go against the regulations established in 1934.

For its part, Coinbase rejects the allegations against it. The crypto exchange firmly maintains that it is not reinterpreting the Howey test in any way. According to its legal team, the SEC is instead expanding the application of the test to fit the growing complexity of the crypto market.

“Coinbase’s position does not imply a revision of the Howey test, but rather a necessary adaptation to take into account the rapid evolution of technology and practices in the crypto market,” it is explained.

This confrontation between the SEC and Coinbase could redefine the status of cryptocurrencies. The final decision will inevitably influence the crypto landscape in the United States.