Beanie Babies Are Bolstering Coinbase's SEC Argument
Beanie Babies aren't exactly synonymous with crypto... Until now. To demonstrate how ludicrous the SEC's stance of likening crypto with securities is, Coinbase has taken a novel approach of using Beanie Babies as a comparison.
Coinbase made the comparison on Wednesday in a New York federal court hearing in which it was arguing for the dismissal of the SEC's lawsuit against it. The US regulator accused the crypto exchange of selling unregistered securities.
William Savitt, a lawyer for Coinbase, told US District Judge Katherine Polk Failla that those exchanging tokens do not gain any rights as part of their purchases, unlike stocks and bonds.
“It’s the difference between buying Beanie Babies Inc. and buying Beanie Babies,” Savitt said.
Hogan & Hogan law firm partner Jeremy Hogan recounted how Failla remarked that the agency’s securities test would lead to a class-action lawsuit against the seller of Beanie Babies.
"The SEC's security test would lead to a class action lawsuit against the seller of Beanie Babies," Failla said, paraphrased by Hogan. He added that the regulator “for the most part fails because the truth is that, for the SEC, a Beanie Baby IS a security.”
“We are all just afraid that you have so little limitation on your standard that some really thoughtful attorneys are going to bring the Beanie Baby class action,” Judge Failla said to an SEC lawyer.
The SEC lawyer rebutted, “The value of that baseball card is going to depend on customer taste and passage of time and what have you, but there's no way to make that more valuable.”
“The token is the key that gets you into this ecosystem,” he added. “The token would be worthless without the ecosystem.”
Ripple Effect
Coinbase is requesting Failla to follow the Ripple decision and dismiss the SEC's lawsuit. In October, the SEC dropped its charges against Ripple's top executives, Chris Larsen and Brad Garlinghouse.
The regulatory body had previously accused the duo of aiding Ripple in violating federal securities laws concerning XRP crypto transactions.
Come 12 February 2024, the Ripple-SEC battle will reach a pivotal “remedies phase.” On that date, a comprehensive examination of Ripple's alleged offenses will commence. The SEC will present its brief on potential remedies for Section 5 violations by 13 March 2024. Ripple will then submit its opposition by 12 April 2024 with the SEC's final response due by 29 April 2024.
It's a crucial timeline as Ripple could face a fine of up to $770 million. Whilst the fate of XRP is yet to be determined, the SEC's decision could establish a standard for the regulation of digital assets in the United States. The SEC dismissing allegations against Ripple signals a change in the wind, suggesting the regulator could be becoming more accommodating to the sector.