A pivotal trial concerning the classification of at least 13 cryptocurrencies as securities, excluding Bitcoin, has commenced. The lawsuit filed by the SEC against Coinbase exchange is a significant test for the SEC, which aims to label all altcoins as securities. Initial details from the hearing appear favorable for the crypto industry.
The SEC initiated legal action against Coinbase on June 6, asserting that 13 altcoins are securities (investment contracts). This move, preceding BlackRock’s application, had previously disheartened crypto investors. The outcome of the trial may determine whether the case will be protracted like the Ripple lawsuit and will include a broad defense of the SEC’s claim against altcoins.
During the hearing, Judge Failla, experienced in crypto matters, questioned the SEC’s rationale for deeming the cryptocurrencies as securities. The judge has so far cornered the SEC’s attorney, highlighting that the SEC has not examined all assets but points to Bitcoin as the sole non-security on Coinbase.
Judge Failla expressed concern over the SEC’s broad definition of a security and its implications for buyers of the 12 or 13 tokens. The SEC attorney confirmed that if these purchases are deemed securities, buyers would have the right to rescind.
The discussion also touched on collectibles, with Judge Failla questioning how to distinguish between collectible items and securities. The SEC attorney argued that the difference lies in the enterprise, which is a network that tokens provide access to, unlike collectible items like baseball cards.