The Securities and Exchange Commission of the United States (SEC) has responded to Coinbase’s assertions that the agency lacks the authority to bring legal action against the well-known Bitcoin exchange. The SEC claimed in a letter to a district judge on July 7. Coinbase was aware of the applicability of federal securities laws to its business operations. Coinbase also notified its shareholders about the possibility of considering assets on its platform as securities.
In its response, the SEC highlights that Coinbase is a “multi-billion-dollar entity advised by sophisticated legal counsel.” The company deliberately disregarded established legal precedents spanning decades. Coinbase established its criteria for defining investment contracts. The watchdog contends that Coinbase is aware of the dangers and has frequently warned its shareholders about the potential breach of federal securities laws relating to the crypto assets exchanged on its platform.
SEC Actions and Legal Dispute: Impact on Cryptocurrency Market
The letter from the SEC is in response to a prior document filed by Coinbase on July 28. The exchange informed the court of its plan to submit a motion for judgment. SEC Chair Gary Gensler stated before Congress that the power to regulate cryptocurrency exchanges lies solely with Congress. Coinbase had more reference to this statement. Coinbase highlighted that the SEC brought charges based on actions. The company already disclosed it to the regulator and the public two years after going public.
According to Roland Chase, a corporate and securities lawyer, the SEC’s role restricts it to evaluating public records and making suggestions to assist a company’s disclosure to potential investors. He stressed that the SEC does not have the power to refuse a company’s public listing based merely on its assessment of the sustainability of the investment.
On June 6, the SEC had previously accused Coinbase of selling unregistered securities since 2019. The case’s pre-motion conference is scheduled for July 13. It will be interesting to see how this legal dispute between Coinbase and the SEC turns out. It could have repercussions for the entire cryptocurrency market and the regulatory environment surrounding digital assets.