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Pro-XRP lawyer Bill Morgan calls attention to a document highlighting the regulator’s contradictory positions on whether a digital asset in itself constitutes a security.
The document was from Coinbase’s recently filed opening brief in the Third Circuit Appeals Court regarding its rulemaking petition against the SEC.
Coinbase Files New Action Against SEC
In 2022, the San Francisco exchange petitioned the securities regulator for clear rules specific to digital assets. However, the SEC rejected the petition in December. Not taking a no for an answer, Coinbase filed an action against the SEC yesterday in the Third Circuit, adding to the existing legal tussle between the parties.
In the recent action, Coinbase’s lawyers argued that the SEC acted arbitrarily and capriciously by claiming jurisdiction over cryptos while failing to provide clear rules on regulating those assets.
Coinbase’s lawyers added that instead of providing clear rules for the industry, the SEC regulated the crypto sector via enforcement actions.
Furthermore, Coinbase accused the regulator of violating the Administrative Procedures Act (APA) when it denied its rulemaking petition without any reasonable explanation.
SEC’s Shifting Interpretation of the Law
Commenting on the development, Coinbase’s Chief Legal Officer Paul Grewal took to the X platform to slam the SEC for “waging an expansive enforcement campaign against the industry where its interpretation of the law continues to shift week by week.”
To further support Grewal’s point, Attorney Morgan shared a table from Coinbase’s opening brief showing the SEC’s conflicting statements.
This table from the @Coinbase filing today is useful to show the SEC’s own contradictory positions in litigation (position in Ripple case highlighted yellow, Hinman speech position in blue) and SEC statements even as it tells the world there is lots of clarity and convinces… https://t.co/Inls5ytEH6 pic.twitter.com/OxmDV8IkAQ
— bill morgan (@Belisarius2020) March 11, 2024
His emphasis was on the SEC’s opinion on whether an asset should be classified as a security.
Per the table, the SEC, in 2018, through its former director of Corporation Finance, William Hinman, claimed that a digital asset alone is not a security. However, the SEC changed this position in 2021 during its lawsuit against Ripple.
At the time, it argued that the digital asset embodies and represents the investment contract- a type of security. Earlier this year, the SEC stated that a digital asset is not a security and subsequently changed this position five days later to argue that the underlying asset embodies an investment contract.
“What an incompetent sh*t show from a paramount regulator,” Attorney Morgan remarked.
Federal Judge and Ripple CLO Knock SEC Over Conflicting Statements
It is worth noting that the SEC has been called out by a federal judge and top crypto stakeholders following its conflicting statements in litigation.
For instance, one of the judges in the Ripple case, Sarah Netburn, accused the SEC of hypocrisy, adding that the regulator adopts “litigation positions to further its desired goal and not out of a faithful allegiance to the law.”
Meanwhile, Ripple’s CLO Stuart Alderoty referred to the SEC as a “bouncing regulator” following its shifting positions in the lawsuit.