The conflict between the SEC and Coinbase centers around two key issues: whether cryptocurrencies are considered securities and the status of the staking service. The SEC views both as securities. According to the SEC, a security is defined as an investment of money in a common enterprise with an expectation of profit derived from the efforts of others. The agency references the Howey Test, a 1946 Supreme Court ruling, which determines what qualifies as an “investment contract” subject to U.S. securities laws. In the SEC’s view, any coin other than bitcoin is considered a security. The SEC is also targeting staking, a process in which investors lock up their crypto tokens with a blockchain validator to earn rewards.
