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In the Beba vs. SEC case, Coinbase, Inc. has filed an amicus brief supporting Beba LLC and the DeFi Education Fund against the U.S. Securities and Exchange Commission (SEC). The brief highlights what Coinbase describes as an “arbitrary regulation-by-enforcement campaign” targeting digital-asset companies. The crypto exchange also claims the SEC has failed to provide clear regulatory guidelines for the digital asset industry, leaving companies in a “Catch-22” situation.
Check Out Contents of Coinbase’s Amicus Brief
Coinbase, the largest digital-asset company in the U.S., argued that the SEC has reversed its stance on digital assets without explanation. Indeed, it has created an atmosphere of regulatory uncertainty. The SEC allowed Coinbase to become a publicly traded company in 2021 without raising concerns about the legality of digital assets on its platform.
The exchange also notes that “the SEC’s then-Director of Corporation Finance publicly stated that a digital asset ‘all by itself is not a security.’” However, Coinbase argues that the agency has since shifted its interpretation and now categorizes most digital assets as securities.
According to the brief, “the SEC’s Chair now regularly asserts that the ‘vast majority’ of digital assets are securities” despite a lack of formal rulemaking. The brief criticizes the SEC’s refusal to engage in “notice-and-comment rulemaking” to clarify its expectations for digital assets.
Coinbase contends that without a rulemaking process, digital-asset firms cannot be expected to comply with regulations designed for traditional financial instruments. As noted in the brief, the exchange filed a petition in July 2022 seeking regulatory clarity from the SEC but received no response for nearly a year.
Today @coinbase filed an amicus brief on behalf of @BebaCollection and @fund_defi to stop the destructive regulation-by-enforcement campaign waged by @SECGov against law-abiding American companies. Most destructive of all is that the SEC itself can’t even make up their mind… pic.twitter.com/qeFdCrdsKn
— paulgrewal.eth (@iampaulgrewal) October 28, 2024
In its petition, Coinbase highlighted the challenges crypto firms face in attempting to comply with regulations tailored for “legacy financial instruments managed by centralized companies, rather than for digital assets operating on decentralized blockchains.” Moreover, the exchange further argues that SEC enforcement actions presuppose a “revisionist view of the securities laws.”
Other Claims
The company claims the SEC has failed to specify which digital assets it considers securities or explain the agency’s jurisdiction over such assets. Coinbase asserted, “the agency has steadfastly refused to engage in rulemaking.” Instead it relies on enforcement actions that make it difficult for companies to comply with existing regulations, the brief stated.
The exchange suggested that the SEC’s strategy is to impose “punitive, retroactive penalties” on companies for not registering digital assets as securities despite the lack of clear guidelines. Moreover, Coinbase claims the agency’s approach has created an “intractable dilemma” for firms attempting to navigate unclear rules.
“The SEC has even openly denied that it has an obligation to make compliance with its rules feasible at all,” the brief states. Thus, the exchange urges the court to grant declaratory relief, emphasizing that “granting declaratory relief in this case would be a critical step on the path out of this morass.”
Coinbase asserted that the SEC’s enforcement approach unfairly targets digital-asset firms and disregards fundamental principles of regulatory fairness. According to the exchange, this approach is a “naked effort to block access to crypto as an asset class” and “secure the extinction of this new technology.”
The brief concludes by asking the court to recognize the SEC’s stance as overreaching. It stated that “this Court can help relieve the pressure of the agency’s unlawful enforcement threats.”