Crypto: Coinbase vs SEC - Ripple's lawyer denounces a serious mistake

As the SEC is in the midst of a legal battle with the crypto exchange Coinbase, new elements have emerged. Ripple’s Chief Legal Officer, Stuart Alderoty, has denounced a major fault committed by the regulator. This concerns the SEC’s allegations about Coinbase selling unregistered securities. Alderoty’s statements add new intrigue to the Coinbase vs. SEC case.

The SEC May Have Made a Major Error

The case opposing the Securities and Exchange Commission, the U.S. regulator, and Coinbase, the crypto exchange, is still ongoing. Ripple’s Chief Legal Officer has unveiled crucial information after the SEC’s hearing. Stuart Alderoty declared on social media the major fault committed by the regulatory authority. His statement could change the dynamics of the ongoing litigation with Coinbase.

Last week (in Coinbase), the SEC told the Court that the question is “whether investors are “pooling [their] capital with the promoter's efforts.” That’s wrong. Howey demands more than investing in efforts. You have to invest in a common enterprise. Revak (2d Cir. 1984).

— Stuart Alderoty (@s_alderoty) January 21, 2024

To recall, the case primarily revolves around the regulator’s accusation that Coinbase sold unregistered securities. An accusation strongly contested by the crypto exchange. However, the allegations by the attorney for Ripple call into question the regulator’s main argument.

He asserts that the focus on pooling investors’ capital with the efforts of the promoter is fundamentally flawed. He argues that the Howey Test requires more than just an investment in the effort, that is, an investment in a common enterprise. He cited the case of Revak to support his point.

A Case to Follow in the Crypto Sphere

Alderoty’s statement could turn the tide although it wasn’t mentioned at the hearing. This recent hearing is decisive not only for the crypto market but also for the entire financial world. It was an opportunity for Judge Failla to question the SEC about the regularity of cryptos such as Solana (SOL) and Cardano (ADA), which indeed were cited in the complaint for violating the securities laws. The defendant’s lawyer responded that these crypto tokens are simply computer code.

The battle between the SEC and Coinbase continues. The crypto exchange could face a rejection of its motion, pushing the case into the discovery phase. After that, both parties retain the right to file a motion for summary judgment.

This case underscores once again the importance of clear and fair regulation in the dynamic world of crypto.