Coinbase lawyers have asked the judge presiding over its legal battle with the U.S. Securities and Exchange Commission to disregard a previous judgment that deemed secondary sales of crypto assets to be “securities transactions," arguing that they were never properly examined in court.
In a March 5 letter to U.S. District Judge Katherine Failla, Coinbase attorney Michael Savitt urged the judge to rebuff the SEC’s previous classification of crypto sales on a secondary market as securities contracts in the SEC vs Wahi case, claiming the judgment should hold “no weight.”
In July 2022, the regulator sued former Coinbase product manager Ishan Wahi, his brother Nikhil Wahi, and their friend Sameer Ramani for insider trading related to nine cryptocurrencies.
The Wahi defendants moved to dismiss the case, arguing the tokens were not “investment contracts” and thus outside of SEC jurisdiction. Coinbase and others filed briefs supporting this motion.
However, before the motion could be decided, the SEC settled with the Wahi brothers in June 2023 in a “zero-dollar, no-admit-no-deny” settlement.
The SEC later obtained an unopposed default judgment against Ramani. In doing so, the court accepted the SEC’s allegations that the crypto assets were “investment contracts” — a position the SEC itself rejected in the Coinbase case.
Savitt claimed that the court judgment against Ramani — who did not even show up for the case — should be given no importance since the key issues were never actually argued or examined in court.
“The Wahi order was procured against an empty chair and its reasoning reflects as much. Coinbase respectfully submits that the default judgment against Mr. Ramani should be afforded no weight.”
The move comes in response to an SEC notice on March 4 attempting to undermine Coinbase’s case by informing the judge that the Wahi insider trading case was relevant because the tokens were deemed securities by the court at the time.
Related: Coinbase argues stocks, Terraform Labs and Howey in 5-hour SEC face-off
In January, Coinbase and the SEC debated whether crypto assets traded on Coinbase's platform met the Howey test for being securities.
Following the hearing, Bloomberg senior litigation analyst Elliott Stein forecast a 70% chance of the exchange securing a full dismissal in the lawsuit.
The SEC sued Coinbase in June 2023, alleging that the cryptocurrency exchange violated federal securities laws by listing 13 tokens it alleged were “securities.”
The firm is seeking an order to drop the case, questioning the SEC's authority over crypto exchanges.
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