Federal judge says Coinbase can delist wBTC, denying Justin Sun-affiliated BiT Global's bid for a temporary restraining order

A California court has ruled that Coinbase can delist wrapped bitcoin (wBTC) on the first trial date of the Justin Sun-connected firm BiT Global’s lawsuit against the major U.S.-based exchange. Coinbase announced last month it would remove wBTC on Dec. 19.

Last week, BiT Global requested a temporary restraining order seeking to prevent Coinbase from removing the tokenized bitcoin product. The Hong Kong-based firm argued doing so would cause imminent and irreparable harm.

However, on Wednesday, U.S. District Judge Araceli Martínez-Olguín said there was no cause to prevent Coinbase from removing the asset, which in recent months has undergone a serious transformation. 

“They were trying to stop us dead in our tracks,” a person familiar with the lawsuit told The Block in an interview. “The court decided today was there wasn't a single factor that they met.”

In November, Coinbase announced it would delist wBTC months after its former custodian BitGo partnered with BiT Global to help manage the $14 billion asset. In a court filing yesterday, the exchange said that Sun, an advisor to BiT Global, has faced “repeated” allegations of “financial misconduct.”

“We're a private company. We have the right to make decisions — even wrong decisions — about who should be on our platform or not,” the Coinbase representative said. “The idea that we're like a water or electrical company, a utility that you have a right to plug into is just bogus.”

BiT Global sued Coinbase, claiming that it violated a number of federal and state laws designed to promote fair competition when deciding to delist wBTC and launch a rival tokenized form of bitcoin, cbBTC. 

The firm also accused Coinbase of libel — or, in the parlance of crypto, “spreading fear, uncertainty and doubt” — that damaged BiT Global’s reputation and threatened the viability of wBTC. BiT Global noted that while the exchange would delist wBTC following a “periodic review,” it has listed memecoins like MOG, PEPE and WIF, which have little to no utility. 

All wrapped up

WBTC, launched in 2019, is the second-largest wrapped crypto token with a market cap of nearly $14 billion. It allows traders to use their bitcoin holding in decentralized applications in the Ethereum ecosystem. Coinbase Wrapped BTC (CbBTC), which is also backed 1:1 by bitcoin, has seen its market cap grow to over $2.1 billion since launching in September.

Coinbase pushed back against claims that it was attempting to monopolize the wrapped bitcoin market by noting its platform accounts for less than 1% of wBTC trading activity. 

The Coinbase representative said the exchange may move to sanction BiT Global or its hired law firm, Kneupper Covey, for “bringing such a foolish claim.” He said that Judge Martínez-Olguín seemed “well prepared” and immediately appeared skeptical of the plaintiff's arguments. 

“What they're trying to argue is that somehow they have a right to distribution on Coinbase based the bogus idea that somehow we're the only game in town,” the representative said, noting that there is “no evidence or even the allegation that anyone — even a single customer — had abandoned BiT Global as a result of Coinbase’s actions.”

The Block reached out to a representative for wBTC for comment. 

Since the wBTC announcement, Sun has seemingly tried to distance himself from the protocol despite previous statements from the BitGo CEO alleging Sun was a “material part of the partnership,” the Coinbase rep said.

“Like good luck to you, Mr. Sun, if you want to start to the wool over a federal judge's eyes the way you try with people onchain. It’s not going to turn out well, that's my prediction.”