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The United States Securities and Exchange Commission (SEC) has responded to Coinbase’s argument challenging its jurisdiction in prosecuting the crypto exchange, claiming that Coinbase was aware of the potential violation of securities laws.
In a letter addressed to a district judge on July 7, the SEC stated that Coinbase, as a publicly traded company, had repeatedly informed its shareholders about the risk that crypto assets traded on its platform could be classified as securities, thus potentially violating federal securities laws.
The SEC’s response highlighted that Coinbase, being a “multi-billion-dollar entity advised by sophisticated legal counsel,” was deliberately disregarding decades of established law, specifically the Howey test, to create its own criteria for defining an investment contract.
The letter from the SEC was in reply to Coinbase’s previous filing, where the exchange indicated its intention to file a motion for judgment. Such a motion is typically used when a party believes that there is no genuine dispute regarding essential facts in a case.
Coinbase had referenced statements made by SEC Chair Gary Gensler during his appearance before Congress, suggesting that market regulation of crypto exchanges falls under the purview of Congress rather than the SEC. Coinbase also pointed out that the SEC filed charges against them two years after their public listing, despite the activities in question having been extensively described to the regulator and the public.
However, legal experts have clarified that the SEC’s role in the “going public” process primarily focuses on reviewing disclosure documents and providing comments to improve transparency for potential investors. The SEC does not possess the authority to deny a company’s public listing solely based on its opinion of the investment value.
Coinbase was charged by the SEC on June 6 for allegedly offering unregistered securities since 2019. A pre-motion conference for the case is scheduled for July 13.
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