Coinbase hits back at SEC’s regulatory overreach
Coinbase has responded to last month’s Wells notice from the Securities and Exchange Commission (SEC), urging the federal agency not to pursue enforcement action against the US largest cryptocurrency exchange.
Coinbase CEO Brian Armstrong and its chief legal officer Paul Grewal released a joint video in response to the Wells Notice. They claim that SEC staffers appear to rest on “superficial and incorrect analogies to products and services offered by others” to justify an enforcement action against Coinbase.
Armstrong said that at the time when Coinbase went public in 2021, they had detailed discussions with the SEC about their business that are now — two years later — the subject of the Wells notice.
“Coinbase is the same company that we were when the SEC allowed us to become public two years ago, after detailed discussions with us about the very aspects of our business that are now the subject of the Wells notice. We didn’t list securities then, and we still don’t. We do not relish litigation against the SEC, but we will vigorously defend ourselves – and stand up for the rule of law for everyone,” they added.
Coinbase executives also pushed back against perceived overreach by the SEC, which has moved aggressively against the crypto industry since the collapse of FTX. The statement suggests that the SEC has changed its stance on Coinbase, despite a lack of regulatory developments. According to founder, the agency acknowledged in 2021 that it didn’t have the authority for enforcement actions against Coinbase, but seems to have changed its position since then.
Earlier in March, Coinbase received a letter from the SEC known as a Wells notice, escalating its crackdown on crypto firms by targeting the biggest US exchange. The legal notice serves as a warning for the company that regulators identified potential violations of federal securities laws or investor protection rules. The civil action may seek injunctive relief, disgorgement, and civil penalties, the company confirms.
The Wells notice isn’t a final decision to take a legal action against the company though, because the SEC’s commissioners must authorize any lawsuits or enforcement settlements. In particular, the agency is looking at aspects of Coinbase’s staking service Earn, as well as investment and custody services, and part of its spot trading business.
Coinbase asked the SEC specifically to identify which assets on its platforms they believe may be securities, but the regulator declined to do so.
