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Coinbase CEO Brian Armstrong has welcomed the SEC lawsuit against his exchange, stating that a court battle will help establish much-needed clarity around crypto rules and regulations.
The CEO expressed complete confidence in the exchange’s legal team and the facts and the law around crypto.
A Chance For Better Clarity
Coinbase CEO Armstrong appeared unfazed in the face of a new lawsuit against the exchange by the United States Securities and Exchange Commission (SEC). Both Coinbase and its CEO issued separate statements discussing Coinbase’s views and chances of victory against the latest legal battle against the regulator. In a tweet shared on Tuesday, Armstrong stated that Coinbase would be proud to represent the crypto ecosystem against the SEC, adding that a court battle was probably required to get some much-needed clarity around crypto and the rules governing it.
“Regarding the SEC complaint against us today, we’re proud to represent the industry in court to finally get some clarity around crypto rules. We’ll get the job done. In the meantime, let’s all keep moving forward and building as an industry. America will get this right in the end.”
Armstrong added that the Securities and Exchange Commission had reviewed Coinbase’s business and allowed it to become a public company in 2021. He also added that the exchange does not list securities, rejecting a vast number of assets that they review. Armstrong also talked about conflicting statements emerging from the SEC and the Commodity Futures Trading Commission (CFTC), adding that they can’t agree among themselves on what is a security and what is a commodity.
“There is no path to “come in and register” - we tried, repeatedly - so we don’t list securities. We reject the vast majority of assets we review. The SEC and CFTC have made conflicting statements and don’t even agree on what is a security and what is a commodity.”
Why Is The SEC Suing Coinbase?
The SEC sued Coinbase, alleging that the New York-based crypto exchange broke US securities laws by offering unregistered securities. The lawsuit alleged that Coinbase never registered as a clearing agency, broker, or national securities exchange. The regulator further alleged that several crypto tokens offered by the exchange, including prominent assets such as Polygon (MATIC), Cardano (ADA), Solana (SOL), and several others, qualified as securities. The lawsuit also alleges that Coinbase has been operating as an unregistered security broker since 2019, two years before its initial public offering.
A Tetchy Relationship
Coinbase and Armstrong have been extremely critical of the SEC for failing to draft clear rules and clarifying how securities laws apply to the crypto industry. The crypto space has long requested clarification about which digital assets would qualify as securities and which as commodities. Coinbase had sued the SEC in April when the latter failed to respond to a petition by Coinbase to provide rules governing digitally traded securities. At the time, the SEC stated that crypto already had clear rules and regulations to govern it and responded to the suit by arguing for dismissal on the 5th of May. In response, Coinbase filed a mandamus reply supporting its suit against the SEC.
The United States Congress is looking to introduce crypto-specific legislation, which could lend some clarity to the situation. For the moment, Coinbase and the Securities and Exchange Commission are entangled in separate legal proceedings against each other.
Coinbase Committed To Regulatory Compliance
Coinbase also provided stats to prove that it is committed to regulatory compliance and failure on the SEC’s part to cooperate. The exchange stated that it had mentioned “staking” 57 times in its S1 report, which the SEC approved. It also added that it met the SEC privately to seek guidance on how to stay legally compliant. The exchange criticized the SEC, stating that it had established no rules pertaining to crypto and relied on a test written in 1946 (Howey test) to determine if assets are securities.
However, others have pointed out that the SEC had made it clear in its approval that it did not necessarily approve the legality of the exchange’s underlying business.
“To the folks posting that it’s unfair that the SEC is filing an action when they approved the Coinbase IPO, please stop. @coinbase was warned that approval of the registration statement didn’t mean approval of the underlying business activity.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.