Confirming the news of the response filed by Coinbase against the United States Securities and Exchange Commission (SEC) in the ongoing case, the exchange’s top executive has again thrashed the regulator. The case between both the entities has been like a heated war with constant criticisms and blame shifting.
In a tweet, Paul Grewal, Coinbase chief legal officer (CLO), confirmed that Coinbase filed the response on Thursday claiming that the SEC’s allegations “lack merit.” He added that the exchange is more than willing to a comfortable discussion with the regulators including SEC for a comprehensive and clear set of crypto regulation. He said:
We welcome dialogue any time with any regulator, including the SEC, and believe new legislation and rulemaking is the right path forward. But the claims in this case go far beyond existing law – and should be dismissed.
Further, Grewal said that Coinbase functions as a secondary market in certain digital assets known as tokens or cryptocurrencies. He explicitly stated that Coinbase is not, and has never been, a securities exchange, or a broker, or “a clearing agency under the federal securities laws.”
With this being said, Coinbase CLO implied that the SEC’s claims lack all merit. Its still-evolving legal position rests on a novel, atextual, and acontextual construction of the word “investment contract” in the federal securities statutes that runs directly contrary to SEC officials’ public admissions about the limits of their agency’s statutory authority.
The Coinbase CLO reiterated that the Coinbase is still operating today the same business it was operating in April 2021. That was the time when the SEC allowed the company to go public without first registering as a national securities exchange or broker or clearing agency, and without first registering its staking services as an investment contract and nothing of legal significance has changed since then.
Grewal’s tweet also go ahead to express that even if the SEC is correct that the assets and services it claims to be securities and identifies are within the scope of its existing regulatory authority, the recent action must be dismissed. The reason behind his implication come on the independent grounds that it violates Coinbase’s due process rights and constitutes an extraordinary abuse of process. Quoting him:
Even were the proffered construction colorable, the major questions doctrine would counsel against its adoption by this Court and in favor of deference to Congress’s legislative prerogative to tackle for itself major policy decisions affecting substantial industry segments.
According to Grewal, rather than testing its new view through notice-and-comment rulemaking, the SEC has chosen to roll out its ever-aggressive agenda through punitive retroactive enforcement actions. Agency enforcement authority is important but not boundless. The SEC’s action here is beyond those bounds and unlawful.
In its lawsuit, the SEC accused the firm of trading at least 13 crypto assets that are securities and were not registered. The SEC stated that these assets should have been registered with regulators before they were issued.
Notably, Coinbase’s lawsuit came months after the Wells Notice from March, which hinted at such an enforcement action. After Wells Notice, the exchange retaliated with narrow legal action. Upon Coinbase’s petition, the US Court of Appeals for the Third Circuit responded to the complaint against the SEC regarding the need for clear rules for trading digital assets.
The ongoing case has been one of the most hot topics recently and has gained significant attention. While the regulator has received criticism for his approach to the case, it has continued to be rigid and deny requests of any further regulation.