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Coinbase is leveraging the recent court ruling in favor of BNB in ​​its legal battle with the U.S. Securities and Exchange Commission (SEC). The exchange cited Judge Amy Berman Jackson’s ruling in the SEC’s case against Binance to bolster its argument that secondary sales of tokens like Binance’s BNB do not constitute sales of securities under the Howey test.

Judge Jackson’s ruling highlighted that secondary sales of the BNB token do not fall within the definition of a sale of securities. This interpretation is based on the Howey test, which is used to determine whether a transaction qualifies as an investment contract.

The test states that a transaction is an investment contract if there is an investment of money in a common enterprise with the expectation of profits from the efforts of third parties.

In a letter sent by Coinbase’s lawyers, the exchange accused the SEC of creating rules arbitrarily and without a consistent framework. According to Coinbase, the SEC “has never coherently explained” its regulatory process and is therefore attempting to retroactively impose it on the digital asset industry. The exchange argues that this approach is unfair and harmful to the cryptocurrency sector.

Coinbase contra a SEC

On June 27, Coinbase filed a lawsuit against the SEC and the Federal Deposit Insurance Corporation (FDIC). The exchange claims that both agencies conspired to keep the cryptocurrency industry out of the banking sector.

Additionally, Coinbase argues that federal agencies failed to comply with the Freedom of Information Act (FOIA) by failing to provide documentation related to their deliberations on regulating Ethereum and its transition to a staking-protected digital asset ecosystem.

Judge Jackson’s ruling reinforces a precedent previously set in the SEC’s case against Ripple Labs by Judge Analisa Torres.

In that case, the court ruled that secondary sales of XRP did not constitute sales of unregistered securities. That’s because the digital asset, on its own, did not meet the SEC’s criteria to qualify as an investment contract.

However, Judge Torres also ruled that the initial sales of XRP to institutional investors constituted sales of securities due to the manner in which the transactions occurred.

The SEC’s legal missteps have drawn criticism even from within the agency. SEC Commissioner Mark Uyeda characterized the agency’s treatment of the cryptocurrency industry as “problematic.”

This criticism reflects concerns among many market participants that the SEC is enforcing regulations inconsistently and arbitrarily, creating unnecessary uncertainty and obstacles to innovation in the cryptocurrency industry.

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