The U.S. Securities and Exchange Commission (SEC) argued in a new filing Friday that Coinbase had acknowledged the possibility that federal securities laws would apply to its listings years ago. The SEC had sued Coinbase a month ago, alleging it was operating as an unregistered broker, clearinghouse, and exchange all in one go, having listed at least 13 different cryptocurrencies that are unregistered securities. In its response to Coinbase’s filing, the SEC said it would oppose any motion for judgement Coinbase might file, and asked a court to strike Coinbase’s arguments that the suit violated the major questions doctrine and other concerns.
Coinbase, a multi-billion-dollar entity advised by sophisticated legal counsel, argues it was unaware that its conduct risked violating the federal securities laws, and suggests that by approving Coinbase’s registration statement in 2021 the SEC confirmed the legality of Coinbase’s underlying business activities – at that time and for all time, the SEC said in its filing. However, the regulator continued, Coinbase had previously adopted the very legal framework enacted by the U.S. Supreme Court to determine whether certain cryptocurrencies met the requirements of federal securities laws, while explicitly discourag[ing] crypto issuers from making any statements traditionally associated with securities.
The SEC also noted that Coinbase’s own public filings acknowledged the potential risk that listed assets might be considered securities. These actions clearly show that Coinbase understood that the securities laws could apply to its conduct and knew which rules to consider in evaluating the legality of its conduct, but nevertheless made the calculated decision to take on this risk in the name of growing its business, the filing said.