Future Of Crypto-Asset Classification Is In 2nd Circ.'s Hands

Manatt Financial Services Partner , Fintech Leader and Financial Services Litigation Partner wrote an for Manatt’s clients that was picked up for circulation to the broad legal community by Law360. Their article is about a recent court decision involving the regulation of crypto transactions and its potential impact for the digital assets industry. 

The decision stems from a 2023 SEC enforcement case in the Southern District of New York against Coinbase alleging the company was engaged in activities that would have required it to register as a securities exchange, broker and clearing agency. The District Court judge denied Coinbase’s dispositive motion seeking dismissal on the pleadings and held that crypto-assets could plausibly be securities subject to regulation under the federal securities laws.   

The judge, however, allowed her decision to be appealed immediately, which would put before the Second Circuit the question of whether crypto transactions can be regulated under the federal securities laws. The authors outline how this development could have substantial implications for the digital asset sector, such as: 

  • Establishing guidelines on the classification of digital assets, influencing how they are regulated and traded 
  • Affecting ongoing lawsuits under new SEC leadership 
  • Legislative attempts to clarify whether crypto-assets are securities or commodities and which regulatory authority is charged with oversight 
  • Spurring institutional investors to enter the digital asset space 

Read the full Law360 article .