The United States Securities and Exchange Commission (SEC) has responded to Coinbase’s claims that the regulatory agency lacks jurisdiction to prosecute the cryptocurrency exchange. In a letter sent to a district judge on July 7, the SEC stated that Coinbase was well aware of the likelihood that federal securities laws would apply to its operations. The SEC pointed out that Coinbase openly informed its shareholders about the possibility of assets traded on its platform being classified as securities.
According to the SEC’s response, Coinbase, as a “multi-billion-dollar entity advised by sophisticated legal counsel,” is intentionally disregarding decades of established law in an attempt to create its own test for determining what constitutes an investment contract. The SEC argues that Coinbase is ignoring the precedent set by the Howey test, which has been the standard for determining whether an investment qualifies as a security.
The SEC’s letter is in response to a previous filing from Coinbase on June 28, where the exchange notified the court of its intention to file a motion for judgment. Coinbase cited an appearance by SEC Chair Gary Gensler before Congress, where he allegedly claimed that there is no market regulator overseeing crypto exchanges and that only Congress has the authority to regulate them. Coinbase also noted that the SEC filed charges against the company two years after it went public, despite the activities being extensively described to the regulator and the public.
Roland Chase, a corporate and securities lawyer, explained that the SEC’s authority is limited to reviewing a company’s public documents and providing comments and questions to improve disclosure to potential investors. The SEC does not have the power to deny a company’s public listing simply because it believes investing in that company is unwise. Federal securities laws governing the “going public” process are primarily focused on disclosure.
On June 6, the SEC charged Coinbase with allegedly offering unregistered securities since 2019. A pre-motion conference on the case is scheduled for July 13.
Get $200 Free Bitcoins every hour! No Deposit No Credit Card required. Sign Up