Why the SEC lawsuit against Coinbase may determine the end or beginning of this year's bull market in the US?

The U.S. exchange giant Coinbase is still entangled in a lawsuit with the U.S. Securities and Exchange Commission (SEC), challenging the regulatory framework for cryptocurrency operations in the United States. The lawsuit stems from the SEC's allegations of unregistered operations against Coinbase, which could set a precedent for the regulation of digital assets, reshaping the landscape of the cryptocurrency industry.

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The lawsuit by the U.S. Securities and Exchange Commission (SEC) against Coinbase has reached a crucial turning point as U.S. District Judge Katherine Polk Failla rejected Coinbase's motion to dismiss the case.

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The court found the SEC's allegations that through its trading and lending services, as well as the Coinbase wallet, should be considered as charges of operating as an unregistered broker, exchange, and clearing agency, to be reasonable.

"Securities are Based on Conduct, Not Definition"

The core of the lawsuit against the SEC revolves around whether certain transactions facilitated by Coinbase qualify as "investment contracts" and therefore fall under the regulation of securities laws.

Judge Failla pointed out that the "definition of securities" is based on the actual circumstances of the transactions, not labels attached to them.

Previously, in the lawsuit between the SEC and Ripple, the SEC's determination of whether unregistered securities were involved was also based on actual conduct.

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This argument is based on a securities law framework that has been in place for nearly 80 years, and its applicability to cryptocurrencies has been questioned by the crypto community.

The Impact of this Legal Battle on the Cryptocurrency Industry

The outcome of this legal skirmish is expected to have far-reaching implications on the U.S. cryptocurrency industry.

If the court sides with the SEC, it could require exchanges to operate under similar rules as national stock exchanges, introducing new restrictions, disclosure requirements, and possibly limiting the types of tokens retail investors can access.

Coinbase's Position and the Road Ahead

While Coinbase argues that the SEC lacks authority and asserts that the transactions on its platform do not constitute financial securities, the court's decision to continue hearing the case highlights the complexity of the evolving regulatory landscape in the crypto market.

Both sides have until April 19th to reach an agreement for this case, during which time the SEC and Coinbase will continue to prepare for battle.

The Outcome Will Determine the End or Beginning of this Year's Bull Market

The current cryptocurrency bull market, driven by the Bitcoin spot ETF, influences the overall cryptocurrency market with the daily influx of funds, causing fluctuations in the rise of competing altcoins, and the dominance of meme coins indicates a lack of significant external capital inflows into markets other than Bitcoin.

As the custodian of all Bitcoin spot ETFs, if Coinbase's custodial qualifications are questioned or if its exchange operations involve unregistered securities, it could introduce uncertainties to the Bitcoin spot ETF market.

Furthermore, the prospects of an Ethereum spot ETF are becoming increasingly bleak, indicating the SEC's conservative stance on cryptocurrencies. There are even rumors that the SEC intends to classify ETH as a security, hence closely monitoring the Ethereum Foundation.

In addition, in the 3/25 Ripple v. SEC lawsuit, the court ruled to impose an injunction, confiscate illegal gains, and award prejudgment interest and civil penalties, requiring Ripple to pay $1,950,768,364 to the SEC.

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All these events, beyond the Bitcoin halving, are more influential external events that could serve as the detonator for the end or beginning of the bull market.