Key Points:
- Coinbase responded to the SEC’s investigation, arguing it lacks due process and is unfair.
- The exchange seeks court clarification on whether the SEC can regulate digital assets without contractual obligations.
- The SEC sued Coinbase claiming some cryptocurrencies on its platform are unregistered securities.
Coinbase Responded to the SEC’s Investigation
Grewal emphasized that the case was initiated by the U.S. Securities and Exchange Commission (SEC), not Coinbase, stating, “Democracy, as well as due process, dies in darkness. We appreciate the Court’s careful consideration of this matter.”
The legal battle continued in March when U.S. District Judge Katherine Failla ruled that the SEC could pursue its lawsuit against Coinbase, accusing the exchange of operating as an unregistered securities exchange, broker, and clearing agency.
In April, Coinbase sought clarification from the U.S. Court of Appeal Second Circuit on whether the SEC has the authority to regulate digital asset transactions that do not involve contractual obligations. The exchange contends that this question is crucial for the cryptocurrency industry’s future. The conflict intensified in May when Coinbase responded to the SEC’s comments on its interlocutory appeal request.
SEC Alleges Unregistered Securities on Coinbase
The SEC’s lawsuit, filed in June 2023, alleges that several cryptocurrencies offered on Coinbase’s platform are unregistered securities.
In response, Coinbase argued that the digital assets listed on its platform are not securities. According to the company, these cryptocurrencies do not constitute “investment contracts” under the SEC’s regulatory framework. Coinbase referenced the Supreme Court’s Howey case, asserting that the cryptos traded on its secondary market are not linked to any contracts involving promoters selling assets.
