In a high stake battle between the U.S. Securities and Exchange Commission (SEC) and cryptocurrency exchange Coinbase, the SEC has fired back, asserting that Coinbase was well aware of potential violations before the regulator’s lawsuit. The SEC’s response filing challenges Coinbase’s argument that the agency lacked jurisdiction. With both sides locked in a legal tussle, let’s delve into the intriguing details of this showdown.
SEC Decoded Coinbase’s Smart Move
The SEC reveals that Coinbase, advised by seasoned legal experts, acknowledged years ago that federal securities laws could potentially apply to its listings. While Coinbase cautiously embraced a legal framework to determine compliance with securities laws, it simultaneously discouraged any language typically associated with securities. Even in its own public filings, Coinbase admitted that its listed assets carried the risk of being deemed securities.
But here’s the twist: Coinbase has also allegedly discouraged crypto issuers from making any statements traditionally associated with securities. A case of playing both sides of the fence?
Standing firm on its stance, the SEC counters Coinbase’s claims with two compelling reasons. First, it rejects Coinbase’s claim that an investment contract requires a formal agreement, using the Howey Test. Second, the SEC disputes Coinbase’s contention that investment contracts are asset sales only if exchanged on secondary markets. However, the SEC’s recent court victory against LBRY supports this notion.
The SEC’s Poker Face
Not one to back down, the SEC also challenges Coinbase’s use of the major questions doctrine. It emphasizes that the SEC has longstanding authority, granted by Congress in 1934, to enforce federal securities laws through civil law enforcement actions. The SEC asserts that this case does not involve uncharted territory but falls well within its established jurisdiction.
With the battle lines drawn, the District Court for the Southern District of New York is set to host a hearing on July 13, where the Coinbase-SEC drama will continue to unfold. The SEC’s response filing paints a picture of Coinbase’s awareness of potential legal risks and its deliberate decision to forge ahead in the pursuit of business growth. As this high-stakes legal showdown proceeds, all eyes eagerly anticipate the court’s ruling to determine the outcome of this gripping clash between Coinbase and the SEC.
