SEC Responds To Coinbase In Ongoing Legal Battle
According to the SEC, Coinbase was aware of securities law violations and even warned some of its shareholders about the risk.
SEC Claps Back At Coinbase
The United States Securities and Exchange Commission (SEC) has finally responded to Coinbase’s claims that the former lacks the jurisdiction to regulate the crypto exchange’s activities.
It all started on June 6, 2023, when the US regulatory body filed charges against Coinbase, claiming that the crypto exchange had offered investors unregistered securities since 2019. The “unregistered securities,” in this case, were several cryptocurrencies.
In the SEC’s recent letter, the organization addressed a district judge and argued that Coinbase, as a “multi-billion-dollar entity advised by sophisticated legal counsel,” intentionally disregarded decades of established legal precedent, specifically the landmark Howey test, in an attempt to create its own criteria for determining what constitutes an investment contract.
Coinbase Acknowledged Securities Law?
The response from the SEC highlighted Coinbase’s own acknowledgment of the risk that assets traded on its platform could be classified as securities. The regulator quoted from Coinbase’s public statements since becoming a publicly traded company, emphasizing that the company had consistently informed shareholders about the potential violation of federal securities laws resulting from its conduct.
The SEC also presented evidence that the crypto firm was well aware of the federal securities laws and how they could be applied to the exchange’s activities. The letter also claimed that the Coinbase team had even gone as far as communicating the potential securities laws violations and the associated risks to its shareholders.
An excerpt from the letter reads.
“Since becoming a public company, Coinbase has repeatedly informed its shareholders of the risk that the crypto assets traded on its platform could be deemed securities and therefore that its conduct could violate the federal securities laws.”
Coinbase Claims Lack Of Jurisdiction
This letter from the SEC is in direct response to a previous filing made by Coinbase on June 28, where the latter appealed to the court to dismiss the case on grounds of lack of jurisdiction and its claims that the SEC did not follow due process.
Coinbase had referenced a statement allegedly made by SEC Chair Gary Gensler during his appearance before Congress, where he reportedly claimed that market regulation of crypto exchanges was outside the scope of the SEC’s authority and that only Congress could confer such regulatory power.
Coinbase also pointed out that despite being a public company for two years, it was only recently that the SEC brought charges against the exchange for activities that had been thoroughly described to the regulator and the public.
The outcome of this case will have significant implications for the regulation of cryptocurrencies and how they are traded within the United States. As the legal battle between Coinbase and the SEC continues, market participants eagerly await a resolution that could shape the future of the crypto industry.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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