Paul Grewal, Chief Legal Officer at Coinbase (NASDAQ:COIN), confirmed via social media that Coinbase has responded to the US Securities and Exchange Commission’s (SEC) effort to block “reasonable discovery” from SEC Chairman Gary Gensler in a case that it—not Coinbase—chose to file.
Democracy, as well as due process, “dies in darkness,” Grewal noted while adding that they “appreciate the Court’s careful consideration of this matter.”
We have responded to @SECGov ‘s effort to block reasonable discovery from Mr. Gensler in a case that it—not Coinbase—chose to file. Democracy, as well as due process, dies in darkness. We appreciate the Court’s careful consideration of this matter. pic.twitter.com/YgXi6lElUX
— paulgrewal.eth (@iampaulgrewal) July 4, 2024
Notably, crypto exchange Coinbase has referenced the recent Binance BNB token precedent in the official SEC petition.
The legal team pointed out that rulemaking is “required here because the SEC has adopted a novel and sweeping, yet still indeterminate, view of the securities laws.”
Coinbase now appears to be leveraging the significant momentum from US Judge Amy Jackson’s latest ruling in the US SEC v. Binance case.
Coinbase has notably cited her precedent, thus reinforcing the decision that secondary sales of Binance’s BNB BNB token may not qualify or be considered securities sales under the guidelines/requirements specified in the seemingly outdated Howey test.
As part of an official letter, the legal team conveyed Coinbase’s allegation that the US SEC appeared to be arbitrarily taking part in the rule-making process without adopting a reliable framework and noted that the regulator has “never coherently explained” its actual process.
However, the SEC seems to be “attempting to impose [such rules] retroactively on the digital asset industry through a scorched-earth enforcement campaign.”
As widely reported, this past month, Coinbase has filed a lawsuit against the SEC and the Federal Deposit Trust Corporation (FDIC), stating that the government entities appear to have been focused on keeping the crypto sector out of the traditional banking ecosystem.
As reported last month, Coinbase stated that the federal authorities did not adhere to the applicable Freedom of Information Act and failed to offer crypto and blockchain industry participants relevant documentation regarding their rulemaking processes regarding Ethereum’s (ETH) move to a crypto-asset market supported by staking.
In the past, the SEC’s classification of the ETH token has also faced considerable scrutiny from industry participants. For instance, back in 2018, SEC Corporation Finance Director William Hinman noted that Ethereum’s ETH token would not have been deemed a traditional security because of its decentralized nature.
Hinman’s statement eventually became a key point of Ripple’s legal argument that US regulators unjustly and inaccurately categorized the XRP crypto token as an unregistered security without clear and objective guidelines explaining the term “securities contract.”
Due to these apparent shortcomings and inconsistencies, the SEC has received considerable criticism from various industry professionals, such as SEC Commissioner Mark Uyeda, who stated that the regulator’s approach to the crypto sector may be considered “problematic.”
Notably, US Judge Amy Jackson’s recent ruling in the US SEC v. Binance case reaffirms another precedent established in the SEC v. Ripple Labs by Judge Analisa Torres. As part of that case, it was determined that secondary sales of XRP tokens were not actually sales of unregistered securities since the token failed to meet the SEC’s classification to serve as an investment contract.
But Judge Torres further stated that the early or initial sales of XRP tokens to institutional clients could be classified as securities sales because of how the sales were carried out at that particular time.
