Will a legal action brought against a former insider trader and employee of Coinbase benefit the cryptocurrency industry?

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A Trade Algo article describing the case of Ishan Wahi, whose outcome may help determine the future of a struggling industry, suggests that some people in the world of digital assets believe this to be the case.

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Earlier this year, Wahi, a former manager at Coinbase, entered a guilty plea for giving his brother as well as a friend tips that helped them make roughly $1.5 million. The Securities and Exchange Commission (SEC), which contends that some of the assets in the case were securities, has also filed a civil lawsuit against him.

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The Trade Algo points out that while Wahi's future is unlikely to change as a result of that case's outcome—he faces prison time—it might alter the laws governing digital assets.

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Because Coinbase's assets aren't securities, the SEC lacks standing, according to a move to dismiss the complaint. In any case, Wahi's attorneys argue, their client was accused of conspiring to commit fraud and money laundering rather than securities fraud.

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According to the Trade Algo, the sector is hoping that federal judges will find that cryptocurrency is distinct from the bonds and stocks that are subject to Wall Street laws.

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"This goes further than the effect of the prior policing cases where the entire investigation went down to that early stage of a token's life, when the company exchanges it for money," said Nick Morgan, a lawyer in Los Angeles whose nonprofit group, Investor Choice Advocates Network, represents people battling what it claims is overreach by the SEC.

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The Wahi case, by definition, includes secondary and not first transactions, hence it has a considerably broader impact.

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As PYMNTS recently reported, if more pessimistic analysts are to be believed, the road to regulatory acceptability for cryptocurrencies appears to be getting longer every day and may never ever happen in the United States.

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The SEC warned investors last week that cryptocurrency offerings on the U.S. market may be against the law because they have not been registered with the authority.

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The recent high in tension between cryptocurrency businesses and US regulators is a result of increasing criticism from both sides.

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The SEC advised investors to only make speculative investments with funds they can afford to lose completely.

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"No entity dealing in crypto assets is registered as a national security exchange with the SEC. Moreover, crypto asset securities are not currently traded on any national securities exchange.

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In response, Coinbase published a blog post with the heading "We petitioned the SEC for fair crypto rules for Americans." Instead, we faced legal threats.

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The company claimed that it was confidence in its business, "the same business we provided to the SEC in preparation to qualify as a public company in 2021," and that it had been ready for the action.