SEC Asserts Coinbase Acknowledged Breaching US Securities Regulations

The United States Securities and Exchange Commission has provided a reply to Coinbase’s recent submission, asserting that the exchange made a “calculated decision” to function as an unregistered securities intermediary.

The firm sought to dismiss the SEC’s allegations back in June.

• The agency initiated a comprehensive legal action against two major players in the crypto sector in early June when it filed successive lawsuits against Binance (and its US subsidiary) as well as Coinbase.
• The latter reacted promptly by submitting a motion to dismiss all allegations just a few weeks following the lawsuit.
• In its filing, the exchange contended that the SEC had previously approved its business model in 2021 when it permitted Coinbase to become a publicly-traded entity.
• The company has consistently emphasized its efforts to engage in constructive regulatory discussions with US authorities, but these attempts have not yielded results thus far. It even requested the SEC to clarify its regulatory stance on cryptocurrencies, but the agency has yet to respond.
• Nonetheless, the SEC addressed Coinbase’s motion to dismiss the allegations on Friday, July 7. The filing states that “Coinbase’s own actions contradict” its assertion “that it was unaware its conduct could violate federal securities laws.”
• The Commission further asserts that the exchange has cautioned its shareholders “repeatedly” since its NASDAQ listing about the risk that “the crypto assets traded on its platform might be classified as securities and consequently that its actions could breach federal securities laws – including in the very registration statement it now cites as evidence that the SEC supposedly approved its actions.”
• The filing also indicates that Coinbase has chosen to disregard “over 75 years of established law under Howey,” and has made two “incorrect arguments” in its motion for dismissal:

“(1) An investment contract must be or include a formal, common law contract, or (2) even if a crypto asset is regarded as an investment contract when it is initially offered and sold by an issuer, that same asset cannot be an investment contract when traded between non-issuers on a platform like Coinbase’s because secondary market transactions not involving its issuer are merely “asset sales.” Both arguments are incorrect,” stated the SEC.

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