Coinbase responds to the SEC’s ‘Regulation by Enforcement’ as the crypto market rebounds
Coinbase, a popular crypto exchange, has challenged the US Securities and Exchange Commission (SEC) over its sporadic enforcement actions against key industry players. The firm believes that the SEC should concentrate on the most important aspects of its work, such as developing appropriate securities rules and guidance.
Coinbase filed an amicus brief in the ongoing insider trading case between the SEC and Wahi, urging the court to dismiss the latter’s allegations of insider trading. The Chamber of Digital Commerce (CDC) had previously filed amicus briefs urging the court to dismiss the same lawsuit. The CDC stated in its filing that the SEC’s regulation by enforcement is a threat to the US digital market and its investors. Coinbase believes that the US SEC has strayed from its primary role of pursuing erroneous lawsuits. As an example of such a lawsuit, the firm filed an amicus brief urging the court to dismiss the insider trading allegations.
Paul Grewal, Coinbase’s chief legal officer, revealed the action in a tweet. Grewal revealed in his posts that the crypto exchange attempted to register with the commission to offer digital asset securities. However, all efforts were futile, and the ongoing case only makes matters worse. Grewal also stated that Coinbase does not currently list securities but would like to. Furthermore, the firm had sent the commission 50 questions that had to be answered for it to list securities but had not received a response. Instead of developing rules or registration options, the SEC has pursued actions that create ambiguity in the definition of an investment contract.
Paul Grewal also mentioned the DOJ’s wire fraud case against Coinbase’s former employee and accomplices. He believes the DOJ did not charge them with securities fraud because the assets involved were not securities. The DOJ acknowledged that the rule of law is important, rendering its fraud case against Ishan Wahi valid and acceptable. However, in the case of the Securities and Exchange Commission’s charges of securities fraud against Ishan Wahi, Coinbase is asking the court to dismiss them because it does not offer securities. Various regulators in the United States have taken numerous enforcement actions against the cryptocurrency industry. Some actions failed three crypto-friendly banks: Silvergate, Silicon Valley, and Signature. Silvergate struggled with the crypto industry’s extended bearish trend, which affected its operations. Following the collapse of crypto exchange FTX, the arrest of its founder Sam Bankman-Fried, and the demise of its sister company Alameda research, the bank was subjected to a barrage of legal action by regulators for its ties to them. Apart from these recent incidents, the US Securities and Exchange Commission previously cracked down on many crypto firms. Kraken, for not registering its staking services, Coinbase, Binance, and Paxos over the Binance stablecoin, BUSD, are among these companies.
