Why Coinbase may walk on a tightrope despite support amid legal woes

• Legal scholars suggest that Coinbase is in the right in its lawsuit against the SEC.
• Volume on the exchange falls, and other CEX tokens observe a price correction.

Coinbase, despite being one of the most prominent exchanges in the crypto sector, has faced some significant challenges. The lawsuit filed against the exchange and the memecoin rug pulls occurring on the Base network have affected the sentiment around the exchange severely.

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A show of hands in support

A group of six legal scholars, experts in securities law and related fields, actively intervened by submitting an amicus brief in favor of crypto exchange Coinbase. This was part of its ongoing legal confrontation with the United States Securities and Exchange Commission (SEC).

An amicus brief, a document filed by a party not directly involved, provides additional supportive arguments to one side of the lawsuit. Thus, emphasizing the broader implications of the case. In their submission, the legal scholars put forth the contention that both federal precedents and the Howey test unequivocally acknowledged that investment contracts necessitated anticipation of business income, profits, or assets.

Emphasizing a crucial point, the group urged the court to strictly adhere to the well-established legal definition of an “investment contract” during the interpretation of its scope. This definition maintains that investors should be inherently guaranteed an ongoing contractual stake in the enterprise’s income, profits, or assets by the very virtue of their investment.

This active intervention by the group of legal scholars took place by submitting the amicus brief in the U.S. District Court for the Southern District of New York on August 11th.

Exchange volume tumbles

At press time, the trading volume on Coinbase significantly decreased over the last 30 days. Furthermore, this decrease in volume pointed toward a noteworthy shift in market dynamics. This was an indication of a potential change in investor sentiment and participation in the exchange.

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If Coinbase continues to face more legal battles, it could pose problems for the exchange and its customers.

Source: CoinGecko

Other than Coinbase, other exchanges were also seen having a difficult time. This was showcased by the price movements of their tokens. Furthermore, tokens related to CEX’s such as Binance and OKX witnessed a price correction over the last week. However, it was only the Huobi token that did not observe a price decline during this period.

Source: Santiment