- Coinbase Tells Judge That Buying Cryptocurrency Is Like Collecting ‘Beanie Babies,’ SEC Says It’s An Investment.
In a recent court hearing on Wednesday, a lawyer representing Coinbase Global Inc, William Savitt, compared buying cryptocurrencies to collecting Beanie Babies, a popular toy from the 1990s.
The lawyer argued that buying crypto tokens doesn’t grant the buyer any rights, unlike traditional securities. The case could have significant implications for the collectibles market.
Savitt argued that when a cryptocurrency is purchased, the buyer doesn’t gain any rights, unlike when they buy stocks or bonds. “It’s the difference between buying Beanie Babies Inc. and buying Beanie Babies,” he said.
The argument was presented as part of a lawsuit filed by the US Securities and Exchange Commission (SEC) against Coinbase, accusing the platform of selling unregistered securities.
U.S. District Judge Katherine Polk Failla noted that the case could have broad implications for the collectibles market, a sector that has seen a surge in value during the COVID-19 pandemic.
The SEC, however, argued that when a crypto token is purchased, the owner is investing in the network or enterprise behind the token.
The SEC’s argument is based on a 1946 Supreme Court decision that defines security as an “investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.”
This court case is a crucial moment for the crypto industry. In June, the SEC filed a lawsuit against Coinbase, alleging that the exchange was illegally operating as a national securities exchange, broker, and clearing agency.
The SEC also targeted Coinbase’s “staking” program, which it claimed should have been registered with the agency.
Coinbase presented its case in a federal court, arguing that the tokens it facilitates trading for are not securities and, therefore, should not be under the SEC’s jurisdiction.
Earlier, the SEC used a recent victory in its case against Terraform Labs to bolster its ongoing legal battles with major cryptocurrency exchanges Binance and Coinbase.
The judgment concluded that UST, LUNA, wLUNA, and MIR tokens are, in fact, securities.
Despite these legal challenges, Coinbase CEO Brian Armstrong has expressed his commitment to continue operations in the U.S., even if it loses its ongoing lawsuit against the SEC.
He also vowed to challenge the cease and desist orders issued by ten state regulators against the company’s staking service and eventually extend staking services across all 50 states in the U.S.