Coinbase CLO Warns Pokémon Might Be Key in Rejecting SEC’s Expanded Security Definition

Paul Grewal, CLO of Coinbase, believes collectibles, like Pokémon cards, might be essential in rejecting the expanded definition of what the U.S. Securities and Exchange Commission (SEC) claims to be a security. To Grewal, these cards are also part of an ecosystem fueling their value, an element the SEC considers part of what makes some tokens securities.

Coinbase CLO Argues Pokémon Collectibles Might Throw Down SEC’s Case

Coinbase CLO Paul Grewal commented about how playing card games like Pokémon, the Nintendo franchise, might dent the logic that the U.S. Securities and Exchange Commission (SEC) presented during the first hearing in its case against the exchange.

In June, Coinbase was charged by the SEC under allegations of operating as an unregistered broker and infringing upon various securities laws.

During this first encounter, one of the core discussions involved the definition of security, which differed for each party. While Coinbase argues that none of the tokens involved in the case (ICP, AXS, CHZ, FLOW, DASH, VGX, FIL, NEXO, NEAR, ADA, SAND, SOL, and MATIC) are securities due to the lack of a signed contract between seller and buyers in secondary markets, the SEC introduced a new element, citing the existence of an ecosystem behind these tokens as a part of its expanded understanding in the issue.

Nonetheless, Grewal argues that not only tokens can have an ecosystem behind them to back them. In a post on X, Grewal stated:

To say Pokémon cards do not provide access to an ecosystem is to say you never played Pokémon. This argument to avoid sweeping them in as securities but still tag tokens is, well, absurd.

During the first hearing, Judge Katherine Polk Failla also showed some contempt for this expanded definition promoted by the SEC, stating that broadening it would risk including even collectibles as securities.

Grewal quoted an article titled “Into the Not-So-Wild World of Pokémon,” describing how Pokémon and its trading card game outgrew their intended target, becoming an ecosystem. The article explained:

In each new game, Pokémon iterates on the ecosystem it invented before, making it more user-friendly and including new features that appeal to players.

What do you think about Pokémon trading cards? Do you think these might be classified as securities under the SEC’s broad definitions? Tell us in the comments section below.

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