Coinbase Challenges SEC’s Classification of Secondary Crypto Sales

Coinbase, in its ongoing legal battle with the U.S. Securities and Exchange Commission (SEC), has petitioned the presiding judge to disregard a previous judgment that classified secondary sales of crypto assets as “securities transactions.” The move comes as Coinbase lawyers argue that the issue was never fully examined in court.

In a letter addressed to U.S. District Judge Katherine Failla on March 5, Coinbase attorney Michael Savitt urged the judge to reject the SEC’s classification of secondary crypto sales as securities contracts in the case involving former Coinbase product manager Ishan Wahi and others. Savitt emphasized that the judgment should carry “no weight” as the key issues were not adequately debated or examined in court.

The SEC sued Ishan Wahi, his brother Nikhil Wahi, and Sameer Ramani for insider trading related to nine cryptocurrencies in July 2022. Although the Wahi brothers settled with the SEC in June 2023, the SEC obtained a default judgment against Ramani, who did not appear for the case. However, Coinbase argues that the default judgment against Ramani should not hold significance as critical issues were not properly addressed in court.

This move by Coinbase follows an SEC notice on March 4, attempting to use the Wahi insider trading case to undermine Coinbase’s arguments, asserting that the tokens involved were deemed securities by the court at the time.

The legal dispute between Coinbase and the SEC intensified after the SEC sued Coinbase in June 2023, alleging violations of federal securities laws. Coinbase has sought to dismiss the case, questioning the SEC’s jurisdiction over crypto exchanges and arguing against the classification of certain tokens as securities.