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The U.S. Securities and Exchange Commission (SEC) argued in its recent filing on Friday that Coinbase had long ago acknowledged the potential impact of federal securities laws on its listings.

The regulatory authority has submitted its reply to Coinbase's filing, where Coinbase argued that the agency lacks the necessary authority to initiate a lawsuit against it. The SEC had sued Coinbase a month ago, claiming that the company was functioning as an unregistered broker, clearinghouse, and exchange simultaneously. This was due to Coinbase listing at least 13 different cryptocurrencies that are considered unregistered securities. In the document filed on Friday, the SEC expressed its opposition to any potential motion for judgment that Coinbase might file. Furthermore, the SEC requested the court to dismiss Coinbase's arguments regarding the violation of the major questions doctrine and other related 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."

Coinbase's own public filings also acknowledge a potential risk for investors, namely the possibility that the listed assets could be deemed 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.

The SEC also provided a glimpse into its counterarguments against Coinbase's proposed motion for judgment, stating that the crypto exchange put forth two arguments that were equally flawed.

Coinbase presented two arguments to support their claim. Firstly, they contended that an investment contract should necessitate a formal contractual agreement. Secondly, they asserted that investment contracts can only be considered asset sales when they are being traded on secondary markets.

According to the SEC, the Howey Test does not necessitate a formal contract, and engaging in transactions on secondary markets might still potentially breach securities laws.

The SEC cited its recent legal victory against LBRY as an illustrative example to support its second argument.

Coinbase is also wrong in its major questions doctrine argument, the SEC said: "This case, by contrast, involves the SEC’s exercise of its longstanding authority to enforce statutory requirements. In 1934, Congress authorized the SEC to enforce the federal securities laws through civil law enforcement actions."

There is presently a hearing slated to take place on July 13 at the District Court for the Southern District of New York.