Coinbase, a major cryptocurrency exchange, is currently facing a lawsuit from the Securities and Exchange Commission (SEC) for allegedly selling unregistered securities. However, during a court hearing on Wednesday, a Coinbase lawyer argued that buying cryptocurrencies is more similar to collecting Beanie Babies than investing in stocks or bonds.
The lawyer, William Savitt, pointed out that when someone purchases a cryptocurrency, they do not gain any rights or ownership in the same way they would with a stock or bond. He compared it to buying Beanie Babies Inc. versus just buying the physical toys themselves.
This case has implications beyond just the crypto industry, as the court’s ruling could also impact the collectibles market. Judge Katherine Polk Failla expressed concern over the possibility of collectibles being regulated by the SEC.
Beanie Babies, a popular collectible in the late 1990s, experienced a boom and bust that coincided with the dot-com bubble. Similarly, various items such as shoes, trading cards, and watches have recently seen a surge in value during the COVID-19 pandemic.
On the other side, the SEC argued that purchasing a cryptocurrency is not just buying a collectible, but also investing in the network or enterprise behind it. They cited a 1946 Supreme Court decision that defines a security as an investment with the expectation of profits from the efforts of others.
The court hearing ended without a ruling, leaving the outcome of this case uncertain. However, it highlights the ongoing debate over how to classify and regulate cryptocurrencies.