SEC Says Coinbase Understood That Securities Laws Applied to Its Business Before Lawsuit

The U.S. Securities and Exchange Commission (SEC) filed a response to Coinbase’s motion to dismiss the regulator’s lawsuit and grant judgment in favor of all claims. In the 177-page document, Coinbase argued that the action violated the crypto exchange’s due process rights and falls outside the purview of the SEC’s jurisdiction.

In a legal response filed on July 7, the SEC said it would oppose any motion for judgement that Coinbase might file and requested that a cross motion be incorporated in the event that it is. For context, by requesting a motion for judgment, Coinbase petitioned the court to award it a win based on the merits of its case without a full-fledged trial.

One major argument in Coinbase’s case is the fact that the SEC approved the exchange’s registration statement at the time of its direct listing on the Nasdaq in 2021. At the time, six of the 12 assets that the SEC alleges are securities were trading on the platform, but the regulator did not raise questions about the legality of its business.

“The SEC’s about-face is not a product of material changes to Coinbase’s business since 2021; none are alleged. Nor is it due to new information. The only change is in the SEC’s position regarding its powers,” said Coinbase. 

However, the SEC is now claiming that Coinbase’s own actions contradict these claims. Since becoming a public company, the regulator said that Coinbase has repeatedly told shareholders that crypto assets could be deemed securities and violate federal laws in several documents, “including in the very registration statement it now points to as proof that the SEC supposedly blessed its conduct.” 

“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,” stated the SEC in the filing. 

A hearing on Coinbase’s motion for judgment is scheduled to take place on July 13 in the District Court for the Southern District of New York.