The United States Securities and Exchange Commission (SEC) stated in a newly revealed filing on Friday that Coinbase has been aware for years that federal securities laws would apply to its listings. This statement follows a filing by Coinbase, in which the company argued that the regulator did not have the power to pursue it. The SEC has therefore filed its own response.
The beginning of hostilities
A month ago, the SEC filed a complaint against Coinbase, claiming that it was acting as an unregistered broker, clearing agency, and exchange by listing at least 13 cryptocurrencies that are not registered securities. The SEC declared on Friday that it will oppose any motion for judgment that Coinbase may present and urged the court to reject Coinbase’s allegations that the complaint was filed in violation of the doctrine of important questions and other issues.
Coinbase’s defense
Part of the filing reads as follows: “Coinbase, a multibillion-dollar entity advised by seasoned lawyers, argues that it did not know that its conduct risked violating federal securities laws, and suggests that by approving Coinbase’s registration statement in 2021, the SEC confirmed the legality of Coinbase’s underlying business activities – at that time and forever.” To counter Coinbase’s anticipated motion for judgment, the SEC provided a preview of its counterarguments, claiming that Coinbase has two “equally flawed” arguments.
Coinbase’s arguments
The first argument put forward by Coinbase was that investment contracts must have written agreements. Their second argument was that investment contracts are only asset sales if they are traded on secondary markets. The SEC stated that secondary market transactions can still violate securities laws, whether or not a formal contract is in place.
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