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Lawyer predicts SEC may lose in potential Coinbase lawsuit due to a flaw in Gary Gensler's own making

Lawyer Stephen Palley believes that if the SEC sues Coinbase, it is likely to lose the case due to a "fatal flaw" in SEC Chairman Gary Gensler's own rules.

The US Securities and Exchange Commission (SEC) has been increasing its scrutiny of the cryptocurrency industry in recent months. One potential target of the agency is Coinbase, the popular cryptocurrency exchange. However, according to a lawyer who specializes in financial regulations, the SEC may face a major obstacle in any attempt to sue Coinbase.

Flaw in Gensler's own making

The lawyer, John Reed Stark, highlighted a flaw in the SEC's argument against Coinbase. The agency claims that Coinbase is offering unregistered securities, but Stark pointed out that SEC Chairman Gary Gensler himself previously stated that most cryptocurrencies are not securities.

Stark argued that this creates a "fatal flaw" in the SEC's potential case against Coinbase. If most cryptocurrencies are not securities, then it would be difficult for the SEC to prove that Coinbase is offering unregistered securities.

Uncertainty around the regulatory status of cryptocurrencies

Stark's comments come amid ongoing uncertainty around the regulatory status of cryptocurrencies. While some countries, such as El Salvador, have embraced cryptocurrencies as legal tender, others have taken a more cautious approach. In the US, regulatory authorities have been grappling with how to classify cryptocurrencies and how to regulate them.

Some cryptocurrency advocates have criticized the SEC's approach, arguing that it is stifling innovation in the industry. They also argue that the agency's actions could harm US competitiveness in the global cryptocurrency market.

Possible Implications for Coinbase

If the SEC were to sue Coinbase (1) and lose the case, it would have significant implications for the exchange and the cryptocurrency industry as a whole. It could lead to greater clarity around the regulatory status of cryptocurrencies and could also limit the SEC's ability to take legal action against other cryptocurrency firms.

However, it is worth noting that Stark's predictions are speculative at this point, and it remains to be seen whether the SEC will indeed pursue legal action against Coinbase.