Coinbase Defends Business Model in Court Against SEC Lawsuit

Central to the lawsuit is the debate over whether crypto assets are securities, with a ruling yet to be issued by Judge Katherine Polk Failla.

Coinbase is currently in court defending its business model against a lawsuit from the Securities and Exchange Commission (SEC), which alleges the firm operates illegally by offering crypto trading and staking services without first registering with the agency.
The central debate in the lawsuit is whether crypto assets are securities and therefore overseen by the SEC. The SEC argues that most crypto assets fall under existing securities law, while Coinbase's lawyers argue that this does not apply to the novel structure of crypto assets.
The judge, Katherine Polk Failla, spent five hours questioning both teams of lawyers and has not yet issued a ruling.
Coinbase's legal team argued that the Howey test, a Supreme Court framework used to determine if an asset is a security, does not apply to cryptocurrencies sold on Coinbase because there's no explicit investment contract present.
The judge also weighed two other debates: one around staking, a product offered by Coinbase that allows users to deposit certain cryptocurrencies to earn a yield, and another around the Major Questions Doctrine, a Supreme Court precedent stating that Congress should not delegate issues of major political or economic significance to agencies like the SEC.