Coinbase’s Legal Chief Criticizes SEC’s Crypto Regulation Approach
In a series of tweets on July 8, Coinbase’s Chief Legal Officer, Paul Grewal, voiced his dissatisfaction with the Securities and Exchange Commission’s (SEC) handling of cryptocurrency regulation. Grewal highlighted the SEC’s disregard for important legal precedents, including the Howey case judgment by the Supreme Court, which established criteria for identifying investment contracts.
Grewal argued that the SEC overlooked the requirement of enforceable rights against issuers, a crucial aspect of the Howey test. He accused the SEC of neglecting the public interest and investor protection, despite granting Coinbase permission for public listing over two years ago.
Furthermore, Grewal pointed out the SEC’s disregard for statements made by its own Chair, who stated that there are no applicable regulatory authorities for cryptocurrency exchanges. He also highlighted recent Supreme Court warnings against regulatory overreach in areas reserved for Congress.
These public expressions of frustration follow a series of legal developments. On March 22, Coinbase announced that it had received a “Wells notice” from the SEC regarding an unspecified portion of its listed digital assets, Coinbase Earn staking service, Coinbase Prime, and Coinbase Wallet. Despite this, Coinbase remained confident in the legality of its assets and services, welcoming a legal process to bring clarity.
On June 6, the SEC charged Coinbase with operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency. The SEC also accused Coinbase of failing to register the offer and sale of its crypto asset staking-as-a-service program.
In a letter filed in court on June 17, Coinbase’s legal team criticized the SEC for neglecting the company’s rulemaking petition, which calls for the establishment of a regulatory framework for digital assets.
Despite the disagreements, Grewal agrees with the SEC that many of these issues should be promptly resolved as matters of law. He continues to advocate for fair and reasonable engagement from the SEC regarding digital assets.
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