TLDR
- Coinbase is citing Judge Amy Berman Jackson’s ruling in the SEC v. Binance case to support its position against the SEC.
- The exchange accuses the SEC of inconsistent and arbitrary rule-making in the crypto industry.
- Coinbase has filed a lawsuit against the SEC and FDIC for allegedly conspiring to keep crypto out of the banking sector.
- The company is requesting an interlocutory appeal, highlighting discrepancies in judicial treatment of crypto transactions.
- Recent legislative and political developments show signs of a shifting regulatory environment for cryptocurrencies in the US.
Coinbase, one of the largest cryptocurrency exchanges in the United States, is intensifying its legal battle against the Securities and Exchange Commission (SEC), leveraging recent judicial precedents and highlighting inconsistencies in the regulator’s approach to the crypto industry.
The exchange is building on the momentum from Judge Amy Berman Jackson’s ruling in the SEC v. Binance case, which determined that secondary sales of Binance’s BNB token do not qualify as securities transactions under the Howey test. This decision has provided Coinbase with valuable ammunition in its ongoing dispute with the SEC.
Liability shouldn't depending on what what court you get sued in or what judge is assigned to your case. Earlier today we filed a notice in our enforcement case against @SECGov about Judge Jackson's decision in the case against Binance. This decision squarely rejected the SEC’s… pic.twitter.com/j41nsvVzDq
— paulgrewal.eth (@iampaulgrewal) July 1, 2024
In a strongly worded letter, Coinbase’s attorneys accused the SEC of engaging in arbitrary rule-making without a consistent framework.
They argued that the SEC “has never coherently explained” its regulatory process but is attempting to impose it retroactively on the digital asset industry through what they describe as a “scorched-earth enforcement campaign.”
This legal maneuver comes on the heels of Coinbase filing a lawsuit against both the SEC and the Federal Deposit Insurance Corporation (FDIC) on June 27.
The exchange alleges that these agencies conspired to keep the crypto industry out of the banking sector and failed to comply with the Freedom of Information Act by not providing documentation related to their rulemaking deliberations, particularly concerning Ethereum’s transition to a staking-based ecosystem.
Coinbase’s Chief Legal Officer, Paul Grewal, has highlighted a significant discrepancy in the judicial treatment of crypto transactions.
He pointed out that two district courts analyzing “economically identical transactions” of the two biggest US exchanges have reached diametrically opposite conclusions on whether these transactions qualify as securities transactions. Grewal emphasized that liability shouldn’t depend on which court is hearing the case or which judge is assigned to it.
The exchange is now requesting an interlocutory appeal, citing “substantial grounds for differences of opinion” on whether the Howey Test should be applicable to crypto transactions in the secondary market.
This move references not only the Binance case but also Judge Analisa Torres’s opinion in the Ripple vs. SEC lawsuit, which established that secondary sales of XRP did not constitute sales of unregistered securities.
These legal challenges come against a backdrop of evolving political and regulatory attitudes towards cryptocurrencies in the United States.
The rapid approval of spot Ether exchange-traded funds in May signaled a more accommodating regulatory stance, boosting market confidence. Additionally, the House of Representatives passed the 21st Century Act (FIT21) with bipartisan support, aiming to clarify the role of government agencies in regulating digital assets.
However, challenges persist. The cryptocurrency industry continues to grapple with regulatory uncertainty, leading some blockchain entrepreneurs to relocate overseas.
The recent SEC complaint against Consensys, accusing it of operating as an unregistered broker and engaging in the sale of unregistered securities, further underscores the ongoing regulatory challenges.
