Coinbase calls out SEC for ignoring four dispositive points after a rebuttal of exchange’s recent filing

Coinbase CLO has revealed that the SEC finally responded to its June 29 filing on overreaching its jurisdiction.
Paul Grewal accuses the financial regulator of ignoring several dispositive points.
The two, however, agree on the need for timely settlement.

Coinbase Chief Legal Officer (CLO) Paul Grewal has indicated that the United States Securities and Exchange Commission (SEC) finally responded to its late June filing, where the exchange criticized the financial regulator for overstepping and going beyond the confines of its mandate. It all coils back to the SEC’s June 6 lawsuit, claiming that at least 13 crypto assets on Coinbase are “securities.”

For Context, Read US SEC sues Coinbase a day after moving against Binance

Coinbase takes another jab at the SEC

Coinbase slammed the US SEC in a June 29 new filing, arguing that the financial regulator has no jurisdiction over cryptocurrencies on the exchange. The agency had claimed that the US-based cryptocurrency exchange runs its crypto trading platform as an unregistered securities exchange and broker. With this slam, the exchange called for dismissal, asking the regulator to clarify its position on regulation, and Congress is ruling on the issue.

Recent revelations have indicated that the agency has finally explained its claims, and Coinbase has expressed dissatisfaction for yet another round.

After Coinbase gave notice of it intent to move to throw out their case, we consented to a few extra days for the SEC to explain why it intends to oppose. They’ve now filed and, sadly, it’s more of the same. 1/6
— paulgrewal.eth (@iampaulgrewal) July 7, 2023

The Coinbase CLO has called out the regulator for many shortcomings, but the first four stand out the most, starting with the fact that the SEC had completely overlooked the Supreme Court’s standing on the Howey test. In case you missed it, the court determined that the primary requirement for an asset to qualify as an investment contract was to have enforceable rights against the issuer.

Grewal also cites the SEC for failing to consider the public interest in its lawsuit. Based on interpretation, if the regulator’s claims were true, they should not have allowed Coinbase to operate for the last two years. The exchange, therefore, claims that the agency failed to give due consideration to how the lawsuit would affect the public and whether the turnout would reinforce its [SEC] consumer protection standards.

They ignore their obligation to give due regard to the public interest and investor protection when they allowed us to list publicly over two years ago. 3/6
— paulgrewal.eth (@iampaulgrewal) July 7, 2023

The third dispositive entails ignoring the assertions made by the agency’s own Chair in testimony to Congress that no regulatory structures were applicable to cryptocurrency exchanges, such as Coinbase.

"They ignore the statements of their own Chair a month later in testimony before Congress that there are no regulatory authorities applicable to cryptocurrency exchanges, like us."

Finally, Grewal also details that the agency ignores the apparent warnings by the Supreme Court just against regulatory overstepping in major questions reserved for Congress.

They ignore the clear and unmistakable warnings of the Supreme Court just last week against regulatory overreach in major questions reserved to Congress. 5/6
— paulgrewal.eth (@iampaulgrewal) July 7, 2023

Common ground between Coinbase and SEC

As a matter of law, therefore, the Coinbase Chief Legal Officer advocates for most of these matters, among others, to be decided promptly as a principle of law. The SEC agrees with this completely, as it tries to execute jurisdiction within the cryptocurrency industry.

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