Coinbase Knew It was Violating US Laws, Claims the SEC

• The SEC filed a response to a brief from Coinbase stating that the exchange knew it was violating US laws.
• The regulator said that the crypto exchange “made the calculated decision to take on this risk.”
• Coinbase legal chief Paul Grewal said that the SEC filing contradicts Gary Gensler’s statements
• The exchange believes that the SEC lacks jurisdiction to sue the crypto exchange.

According to the United States Securities and Exchange Commission (SEC), the leading exchange in the country, Coinbase, knew that it was in violation of US securities laws prior to the regulator’s lawsuit. The two entities have been arguing over the listing of some of the cryptocurrencies on the exchange that the regulator considers securities.

The SEC submitted a court filing in response to Coinbase’s claims that the regulator does not have sufficient authority to file a lawsuit against the crypto exchange. It is crucial to note that the regulator filed a lawsuit against the crypto trading platform in June, claiming that the Brian Armstrong-led company was operating an unregistered securities exchange

In the lawsuit, the regulator mentioned 13 different cryptocurrencies that are unregistered securities, including Solana (SOL), Cardano (ADA), etc.

“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,” the SEC said.

In the filing sent by the lawyers representing the SEC to Judge Katherine Polk Failla of the Southern District Court of New York, the regulator said that Coinbase “adopted the very legal framework as a basis for making listing decisions that it now claims has no applicability to its activities.”

Paul Grewal, the Chief Legal Officer at the crypto exchange, said that the SEC is ignoring the statements made by Chair Gary Gensler a month ago, wherein he said that “there are no regulatory authorities applicable to cryptocurrency exchanges.”

After Coinbase gave notice of it intent to move to throw out their case, we consented to a few extra days for the SEC to explain why it intends to oppose. They’ve now filed and, sadly, it’s more of the same. 1/6

— paulgrewal.eth (@iampaulgrewal) July 7, 2023

It is important to note that the filings from Coinbase also point out the fact that one potential risk to customers revolves around the possibility of listed digital assets being considered securities

“These actions clearly show that Coinbase understood that the securities laws could apply to its conduct and knew which rules to consider in uating the legality of its conduct, but nevertheless made the calculated decision to take on this risk in the name of growing its business,” the SEC filing said.