Coinbase Warns SEC About Launching Litigation Against the Exchange

The crypto exchange’s chief legal officer said in a Thursday blog post the Coinbase team “will vigorously defend ourselves”

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Coinbase CEO Brian Armstrong | Artwork by Axel Rangel modified by Blockworks

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Coinbase has fired back at the SEC after the securities regulator targeted the crypto exchange for potential alleged securities violations. 

In a response to the SEC’s Wells notice issued to Coinbase last month, the company said it would defend itself against a regulator it says is going beyond its authority. 

Coinbase became a public company in 2021, a recent filing notes. Though based on a “newly expressed view,” according to the crypto exchange, the SEC now contends Coinbase has operated illegally since at least 2018. 

“This abrupt move toward litigation did not result from discovering new facts about Coinbase’s business; the commission has the same facts today that it has had for years,” the filing states. “Nor does it result from the staff’s discovery of something that Coinbase concealed or misrepresented in its extensive engagement with the staff, including during the registration process. Coinbase did no such thing.”

According to the document, the SEC is using the threat of litigation against Coinbase to push the exchange to admit that most of the digital assets listed on its platform are securities. Additionally, the SEC wants Coinbase to register as a national stock exchange and clearing agency.

“Neither of those objectives is supported by law or within the bounds of the commission’s authority,” Coinbase wrote. “For that sole reason, the commission should exercise its discretion to decline to bring an enforcement action against Coinbase.” 

An SEC spokesperson told Blockworks the regulator generally does not comment on an investigation “unless or until charges are filed.”

The formal response comes about a month after the SEC’s Wells notice, a letter that typically signals an upcoming enforcement action. 

The company said at the time it was “confident in the legality of our assets and services.” Coinbase CEO Brian Armstrong said in a Twitter Space soon after that the courts might be able to offer clarity on this matter. 

Coinbase Chief Legal Officer Paul Grewal reiterated in a blog post published Thursday that the company believes that it has never listed securities. He and Armstrong also appeared in a video detailing their thoughts on the matter.  

“We’d like to [list securities] in the future, but the SEC has still not complied with the law by providing companies like Coinbase with a way to register to be able to do that,” he said.

“We do not relish litigation against the SEC,” Grewal added, “but we will vigorously defend ourselves — and stand up for the rule of law for everyone.”

Updated April 27, 2023 at 4:28 pm ET: Added comment from SEC spokesperson.


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