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SEC v. Coinbase

1:23-cv-04738

United States District Court

IN THE


FOR THE SOUTHERN DISTRICT OF NEW YORK

Case Summary 

In its June 6, 2023 initial complaint, the SEC alleged that Coinbase operated as an unregistered securities exchange, broker, and clearing agency, including brokerage activities through Coinbase Prime and Coinbase Wallet. It also alleged that Coinbase’s staking program constituted an unregistered securities offering and that parent company Coinbase Global was liable as a control person. The central issue was whether the relevant cryptocurrency transactions and staking arrangements constituted “investment contracts” under federal securities law. The SEC sought permanent injunctions, disgorgement with interest, and civil penalties.

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In her March 27, 2024 opinion (PDF), Judge Katherine Polk Failla largely denied Coinbase’s motion for judgment on the pleadings. Applying the Howey test, she found the SEC plausibly alleged securities transactions and allowed the exchange, brokerage, clearing-agency, staking, and control-person claims to proceed. She dismissed the Wallet claim because the allegations did not sufficiently establish that Coinbase acted as a broker through that service. This was a pleading-stage ruling, not a final finding of liability. The case ultimately ended through a joint dismissal with prejudice filed February 28, 2025, preventing refiling of the same claims. The SEC’s February 27 dismissal announcement expressly attributed the decision to its changing regulatory approach, not an assessment of the claims’ merits; see the filed dismissal (PDF).

Lexicon Labs Amicus Brief

SEC v Coinbase thumbnail.png

October 10, 2023

Our Position

President Roosevelt demanded that no essentially important element shall be concealed from the buying public. Crypto buyers think they are investing because that's what is being promoted to them, but, they are merely speculating. We believe that is the biggest concealment of all, which is diametrically opposed to Congress's broad mandate of full and fair disclosure.

 

As a result, the SEC has the authority to regulate cryptocurrencies, and we believe that the most effective regulatory solution could be as simple as a label that states: "This is a speculative security." Such a labeling requirement has parallels in other regulatory regimes and was actually implemented by financial regulators a century ago.

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