The US Securities and Exchange Commission (SEC) disputed leading crypto exchange Coinbase’s request for millions of records, including SEC Chair Gary Gensler’s private correspondence. This is the most recent development in the SEC vs. Coinbase saga.
In a court filing dated August 5, the SEC stated that Coinbase violated the strict liability provisions of the federal securities statutes. The regulator finds it unlikely anyone will dispute that Coinbase did not register as a securities exchange, broker, and clearing agency, as it should have.
The SEC further states it has provided “the materials relevant to these facts” insofar as they are available. It allegedly “produced 240,000 documents and is searching another 117,000 documents for responsive material, including emails Coinbase claims are relevant to fair notice.”
SEC vs. Coinbase’s “sweeping demand”
In its response, Coinbase demanded that the SEC log or produce every document about applying securities laws to digital assets, including all of its external and internal emails. Coinbase has deemed these relevant to the Howey analysis.
The Commission finds that the Court’s analysis of the facts and the law will decide the case, not its internal or external discussions. Coinbase has not cited a single case to the contrary.
The SEC concludes that searching for, producing, or logging another “three million irrelevant external or internal documents” is unnecessary.
Paul Grewal, CLO of Coinbase, posted on X that the SEC had to produce the documents to demonstrate the inconsistency in its views of digital assets. According to him, the least the SEC owes Coinbase is transparency if it will enforce its “unprecedented regulation.”
Update: Today @SECGov filed its response to our request to produce important documents showing the record of the SEC’s inconsistent views of digital assets and its own regulatory reach. If the SEC is going to engage in an unprecedented regulation by enforcement campaign, the… https://t.co/MxQ1omDGN3
— paulgrewal.eth (@iampaulgrewal) August 5, 2024
The SEC’s case against Coinbase dates back to last year when the regulator accused the exchange of operating without the required registration. The SEC also claimed Coinbase’s staking products were unregistered securities.
Coinbase first requested documents in April, in SEC vs. Coinbase. In June, the exchange announced intentions to subpoena Gensler’s personal correspondence related to cryptocurrency during his time as SEC chair and four years before that.
This request angered the SEC, which described it as a “blatant impropriety.” On June 28, the regulator wrote to District Judge Katherine Polk Failla, who is overseeing the case. In the letter, she is asked to reject Coinbase’s request.
Failla was shocked by Coinbase’s request for Gensler’s personal correspondence, especially that predating his tenure as SEC chair.
