As the regulatory war between the United States Securities and Exchange Commission (SEC) and Coinbase intensifies, the firm has responded to the latest action by the regulator. Notably, Coinbase said that it is willing to take the ongoing legal fight with the regulator to the highest court if required.
On Tuesday, Paul Grewal, Coinbase’s chief legal officer (CLO), in an interview, said that the firm is ready to take the matter to the Supreme Court, the nation’s highest court as the SEC intensifies its crackdown alleging crypto assets to be securities. He said:
If it takes going to the Supreme Court, that’s what we’re prepared to do.
The regulator has targeted renowned exchanges in the name of violation of federal securities laws, claiming crypto assets to securities, a topic which has been controversial for a long time. The classification of crypto assets as securities has often been met with counter-arguments and theories. To this, Grewal added:
I think that every court that looks at this issue is going to conclude the SEC has fundamentally gotten this wrong.
On Tuesday, the SEC sued Coinbase, the largest US-based crypto exchange, alleging in a 101-page complaint that the company violated rules in allowing users to trade tokens that were unregistered securities. The regulator is seeking an order that would require Coinbase to comply with securities laws and give up what the agency says were ill-gotten gains. In a
Taking a jab at the lawsuit, Grewal said that working through enforcement actions could take many months or even years. Notably, the agency’s suit applies to a limited subset of the company’s revenue-generating businesses. One of the targeted services is its staking services as the SEC also alleged that the firm failed to register the offering and sale of its staking-as-a-service program.
Its staking services include a business that offers users a return in exchange for putting up tokens to help facilitate transactions via blockchain. Simultaneously, in his appearance before lawmakers regarding the crypto regulation, Grewal said that the firm has adhered to regulation over the years. It added that Coinbase “met with the SEC in 2022 asking for guidance” 30 times.
In March, the SEC sent a Wells Notice to Coinbase hinting at a possible enforcement action. Upon receiving that, the firm expressed disappointment and had shown a willingness to participate in legal action if required.
The firm later retaliated with a narrow legal action to seek clarity referring to its petition from July 2022 asking the SEC to provide overdue guidance for the crypto industry which has since been ignored. The petition against the SEC seeks an immediate determination to take a series of discretionary actions to replace existing applicable securities laws and regulations with a comprehensive new regulatory regime for the trading of crypto assets that are securities.
In response to the complaint, the US Court of Appeals for the Third Circuit sent a notice to the SEC regarding the need for clear rules for trading digital assets. However, even after all this, the SEC stayed firm on its stance and disregarded the need for regulations. Denying Coinbase’s demand, the SEC said it had no right to request regulatory clarity and that securities rules already exist.
As evident, the SEC has been on an enforcement spree and targeted major crypto firms. Before Coinbase, the regulator filed similar charges against Binance’s US division claiming 16 assets as unregistered securities. While the SEC chief continues to deny the need for crypto regulation, recent incidents in the sector suggest otherwise.
The two primary regulators in the US i.e. the SEC and CFTC both have come behind Binance claiming their jurisdiction over certain stablecoins including BUSD. This highlights the need for clarity which the SEC deems unnecessary.