Key Takeaways
- SEC claims that Coinbase had previously acknowledged the possibility of federal securities laws applying to its listings
- SEC pointed out that Coinbase’s own public filings noted the potential risk that listed assets might be considered securities.
The U.S. Securities and Exchange Commission (SEC) has responded to Coinbase’s argument that it lacks jurisdiction in the ongoing lawsuit filed against the cryptocurrency exchange. In the lawsuit, the SEC accuses Coinbase, the second-largest crypto exchange by volume, of operating its crypto asset trading platform as an unregistered national securities exchange and brokers, thereby violating federal securities laws.
In its filing on Friday, the SEC claimed that Coinbase had previously acknowledged the possibility of federal securities laws applying to its listings. The regulatory body highlighted Coinbase’s adoption of the legal framework established by the U.S. Supreme Court to assess whether certain cryptocurrencies met the requirements of federal securities laws. Coinbase had also discouraged crypto issuers from making statements traditionally associated with securities.
The District Court for the Southern District of New York has scheduled a hearing for July 13, 2023, where both Coinbase and the SEC will present their arguments and further explore the legal issues at hand.
Furthermore, the SEC pointed out that Coinbase’s own public filings noted the potential risk that listed assets might be considered securities. This indicated that Coinbase was well aware of the potential applicability of securities laws to its conduct and understood the rules to evaluate the legality of its operations. The SEC argued that Coinbase consciously decided to take on the risk of operating outside the confines of federal securities laws to fuel its business growth.
The regulatory body firmly opposed any motion for judgment that Coinbase might file and requested the court to strike down Coinbase’s arguments related to the major questions doctrine and other concerns.
The SEC disagreed with Coinbase’s assertion that an investment contract must include a formal contract, clarifying that the Howey Test does not require a formal agreement. Additionally, the SEC stated that transactions on secondary markets could still violate securities laws, contradicting Coinbase’s second argument.
Coinbase has been actively lobbying for clearer cryptocurrency regulations in the United States, aiming to address the increasing regulatory scrutiny faced by the industry. In a recent media interview, Coinbase CEO Brian Armstrong revealed that the company had met with the SEC over 30 times in the past year without receiving any feedback on compliance measures.
The SEC also refuted Coinbase’s claim regarding the major questions doctrine, asserting that the case involves the SEC’s exercise of its long-standing authority to enforce statutory requirements.
