Days before the hearing, the US SEC submitted an official response to Coinbase's allegations.
The legal face-off between the United States Securities and Exchange Commission (SEC) and Coinbase intensifies as the SEC pushes back against the crypto exchange's jurisdictional claims in its latest response.
The SEC, in its recent filing, has firmly contended that Coinbase was aware of the implications of federal securities laws on its operations several years prior.
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It is worth noting that a month ago, the SEC leveled accusations against Coinbase for operating as an unregistered broker, clearinghouse, and exchange. It was alleged that Coinbase listed at least 13 cryptocurrencies considered unregistered securities.
In the July 7th filing, the US securities regulator noted:
Coinbase, a multi-billion-dollar entity advised by sophisticated legal counsel, argues it was unaware that its conduct risked violating the federal securities laws, and suggests that by approving Coinbase’s registration statement in 2021 the SEC confirmed the legality of Coinbase’s underlying business activities – at that time and for all time.
Contrary to these claims, the SEC asserts that Coinbase had, in fact, embraced the legal framework defined by the US Supreme Court to evaluate if particular cryptocurrencies comply with federal securities laws.
It also notes that Coinbase explicitly discouraged crypto issuers from making statements that are "traditionally associated with securities."
Adding further strength to its argument, the SEC referred to Coinbase's public filings, highlighting that Coinbase investors were made aware that the listed assets could be classified as securities. The SEC asserted:
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.
The legal proceedings continue to unfold with a hearing set for July 13th in the District Court for the Southern District of New York. As the SEC and Coinbase continue to spar, the crypto community keenly follows the case, aware of its potential to shape the regulatory landscape for digital currencies.
