Legal
With Coinbase joining Binance as the second cryptocurrency heavyweight sued by the SEC in roughly 24 hours, the industry is reeling.
And industry participants on Tuesday were amping up their efforts to digest the content — and the implications — of both landmark legal actions.
The SEC this week claimed that both Binance and Coinbase have been operating unregistered exchanges and listing a number of individual tokens the regulator has deemed unregistered securities.
“But while paying lip service to its desire to comply with applicable laws, Coinbase has for years made available for trading crypto assets that are investment contracts under the Howey test and well-established principles of the federal securities laws,” the SEC claims.
Binance’s CEO, who took to Twitter on Monday after his company was served with the suit, was quick to play to the court of crypto public opinion in responding to the SEC’s suit against rival Coinbase.
Changpeng “CZ” Zhao tweeted, “If you have to pick a fight with everyone, maybe you are the one at fault.”
If you have to pick a fight with everyone, maybe you are the one at fault. 🤷♂️
— CZ 🔶 Binance (@cz_binance) June 6, 2023
In expounding upon the Coinbase suit, SEC Commissioner Gary Gensler via Twitter early on Tuesday doubled down on his agency’s legal opinion regarding Binance from the day prior.
Coinbase’s alleged failures deprive investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC. https://t.co/FwpdmENvoL
— Gary Gensler (@GaryGensler) June 6, 2023
Gensler also agreed to interviews on both CNBC and Bloomberg scheduled for Tuesday morning.
Jack Dorsey, in a tweet on Monday, seemingly projected cryptocurrency industry support on the heels of the SEC’s 136-page lawsuit against Binance, the exchange’s US affiliate, and founder Zhao. Dorsey, the chief executive of Block, has been a vocal advocate of cryptocurrencies — especially bitcoin.
Dorsey tweeted, “Steady lads.”
Steady lads
— jack (@jack) June 5, 2023
Prior to the SEC’s latest move against Coinbase, Paul Grewal, the exchange’s chief legal officer, laid out his ideal framework for more clear rules and regulations around digital assets. Coinbase has repeatedly asked the SEC for updated digital asset guidance.
How we define digital assets is critical for enabling innovation. Digital assets are diverse, and if we fail to effectively draw clear definitions of which assets are securities, which are commodities, and which are neither, crypto will continue to sit in regulatory limbo.
— paulgrewal.eth (@iampaulgrewal) June 5, 2023
Grewal is set to appear before the House Committee on Agriculture to discuss the Digital Asset Market Structure Discussion Draft Tuesday morning.
Did the SEC give “Binance some slack?”
Traders this week have once again been asking why Coinbase was even allowed to go public in 2021 — considering that the SEC claims that it’s been offering the sale of unregistered securities as well as operating as an unregistered broker since 2019.
“In fact, by suing Coinbase they pretty much just gave Binance some slack to win against their lawsuit as well; since they can just delay until Coinbase finishes and then cite Coinbase’s case,” @WolfOfPoloniex tweeted.
So in SEC’s complaint vs Coinbase, it states that they’ve been acting as an unregistered broker since 2019.
Yet…. the on April 14th, 2021 $COIN became a public company on the Nasdaq.
How on God’s green earth do they possibly believe this lawsuit will ever hold up in court?… pic.twitter.com/tYyEroRN6F
— The Wolf (@WolfOfPoloniex) June 6, 2023
Crypto analyst Miles Deutscher had similar concerns, tweeting, “So you’re telling me that the SEC let an ‘unregistered broker’ IPO – after carrying out due diligence?”
So, let me get this straight.
The SEC says that “Coinbase has operated as an unregistered broker since 2019”.
Yet Coinbase IPOd in April 2021.
So you’re telling me that the SEC let an “unregistered broker” IPO – after carrying out due diligence?
Well done Gary. 👏
— Miles Deutscher (@milesdeutscher) June 6, 2023
After receiving a Wells notice from the SEC in March, Coinbase said it would defend itself against a regulator it says is going beyond its authority.
CEO Brian Armstrong said in a Twitter Space soon after the Wells notice that the courts might be able to offer clarity on this matter.
Coinbase dropped its net loss to $79 million during the first quarter — down from $557 million in the last three months of 2022 — as it sought to reel in spending. The company said it expected costs to rise in the second quarter, in part due to legal expenses.
Ben Strack contributed reporting.
