Senator Pat Toomey Slams SEC’s “Regulation by Enforcement” in Regards to Coinbase Claims

Coinbase (NASDAQ:COIN) recently worked with the Securities and Exchange Commission (SEC) to pursue an insider action investigation that ended up with three individuals, including a former Coinbase manager, being hit with a lawsuit by the SEC as well as parallel criminal charges from the US Department of Justice. Yet, once again, no good deed goes unpunished as the SEC has taken the opportunity to gun for Coinbase by indirectly accusing the crypto marketplace for listing unregistered securities.

Within the SEC’s complaint, the document alleges that Coinbase listed 9 digital securities while mentioning three by name. Coinbase Chief Legal Officer Paul Grewal defended his company in a blog post, stating they have never listed a security. Grewal criticized the SEC on the enforcement action as the company aided the investigation, but instead of having a dialogue with Coinbase on its digital securities claim, the SEC “jumped directly to litigation.”

Senator Pat Toomey, long a supporter of Fintech innovation and digital assets in general, took to Twitter to question the SEC’s approach, stating:

“the SEC’s regulation-by-enforcement approach to digital assets poses a serious challenge for any well-meaning innovator who’s striving to comply with existing laws and regulations. Providing regulatory clarity prior to enforcement would benefit regulators and investors alike.”

Senatory Toomey called the event a “perfect example of the SEC having a clear opinion on how and why certain tokens classify as securities. Yet the SEC failed to disclose their view before launching an enforcement action.”

Senator Toomey said that any violation of law should be prosecuted, but the SEC has long avoided altering its course, which believes virtual all digital assets are securities and thus regulated under existing securities law.

The SEC under the leadership of Chairman Gary Gensler has been a disappointment for many financial innovators as he has taken a hostile approach to the digital asset sector. When Gensler was approved by the Senate, it was hoped his knowledge of Fintech and prior experience at the CFTC would bode well for the Fintech sector, an industry that wants to collaborate with regulators, yet industry insiders remain frustrated by the Commission’s approach to change. Some insiders believe his actions belie a deeper ambition of currying favor on Capitol Hill for a future, higher appointment within the current Administration.

 

 

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