In a letter sent by the United States Securities and Exchange Commission (SEC) to a district judge, it is revealed that Coinbase, the popular cryptocurrency exchange, was aware of the likelihood of federal securities laws applying to its operations. The SEC alleges that Coinbase openly informed its shareholders about the possibility of assets traded on its platform being classified as securities.
The SEC’s response states that since becoming a public company, Coinbase repeatedly alerted its shareholders to the risk that crypto assets traded on its platform could be deemed securities, potentially violating federal securities laws. The regulator emphasizes that Coinbase is a well-established entity, valued in billions, with access to sophisticated legal counsel. However, the SEC accuses Coinbase of deliberately disregarding decades of established law while attempting to create its own criteria for determining what constitutes an investment contract.
The SEC’s letter is a response to a previous filing made by Coinbase, where the exchange indicated its intention to file a motion for judgment. This type of motion is typically used when there is no significant dispute over material facts in a case. Coinbase referenced SEC Chair Gary Gensler’s appearance before Congress, where he allegedly stated that only Congress had the authority to regulate crypto exchanges. Coinbase also highlighted that charges were filed against them by the SEC two years after going public, despite providing detailed information to the regulator and the public.
Corporate and securities lawyer Roland Chase clarified that the SEC’s role is limited to reviewing the disclosure documents of companies going public and providing comments and questions to enhance transparency for potential investors. He emphasized that the SEC does not have the power to deny a company’s public listing based solely on its opinion of the investment’s viability.
The SEC had previously charged Coinbase on June 6 for allegedly offering unregistered securities since 2019. A pre-motion conference regarding the case is scheduled for July 13.
Categories:
- Cryptocurrency Regulations
- Legal Issues in Crypto Industry
- SEC’s Jurisdiction and Enforcement Actions