Coinbase stated on Tuesday that it wants the court to compel the US Securities and Exchange Commission (SEC) to produce documents explaining how securities laws describe cryptocurrencies.
Through its consulting firm, History Associates Inc., the exchange filed a motion with the US District Court for the District of Columbia for leave to file a partial summary judgment.
Coinbase Demands SEC Internal Documents on Crypto Enforcement
Coinbase filed a motion in DC court seeking a judge to issue a partial summary judgment in its ongoing lawsuit against the SEC. The exchange is seeking internal documents behind crypto enforcement.
The company’s legal team argued that the SEC has been obstructing its attempt to obtain these documents through FOIA requests ever since the lawsuit was filed. The SEC is now proposing a three-year delay just to decide whether it can release the requested information.
NEW: This morning @coinbase filed a motion in a DC court asking a judge to grant a partial summary judgment in its lawsuit suing the @SECGov to gain access to internal documents relating to #crypto enforcement.
Coinbase lawyers say the SEC has been stonewalling its attempts to…
— Eleanor Terrett (@EleanorTerrett) October 15, 2024
This legal maneuver follows the exchange’s June filing of a lawsuit against the SEC and the Federal Deposit Insurance Corporation. It is over a “failed Freedom of Information Act request”. The FOIA legally permits the public to request access to federal agency records. However, the company claimed the agencies haven’t released the requested information regarding their position on crypto regulations.
The exchange requested both internal and external communications regarding, amongst other things, the SEC’s investigations. In particular it needs to know whether certain assets, including Ether (ETH), are securities. This could be a big deal for the crypto industry. It’s because the way in which Ether gets classified might affect many projects and platforms. The SEC is leading a similar fight regarding security definition with Ripple. Just recently, ex-SEC official Marc Fagel indicated that the SEC may appeal the court ruling regarding secondary sales of XRP.
The Coinbase lawsuit came after blockchain firm ConsenSys filed suit against the SEC in April. It claimed the Commission had overreached its authority. The suit pointed out that, in March 2023, the then-former SEC Director of the Division of Enforcement, Gurbir Grewal, authorized an investigation into “Ethereum 2.0”. He allegedly wanted to determine whether the buying and selling of Ether had constituted a security.
ConsenSys later said that the SEC had closed this investigation. Still, the question of how the regulator views Ether remains highly controversial.
SEC Faces Criticism for Delaying Document Release
This puts it into a more significant regulatory push. Coinbase said the SEC has stepped up its enforcement actions against a number of different crypto businesses and services. Last year, the SEC filed a separate lawsuit against the company. It alleged it had offered some products without registering as an exchange. Meanwhile, The outcome may be highly influential for how the US regulates crypto assets.
The case comes amid an ongoing spat between the exchange and the SEC over greater regulatory clarity. This happened after the agency repeatedly took enforcement action against various crypto companies for unregistered operations.
The exchange initially faced pushback from the SEC, which said it was exempt from complying with Freedom of Information Act requests. Recently, it ceded ground, acknowledging it may not entirely be the case.
Having conceded that ground, the SEC now says it will take roughly three years to re-review and potentially release the documents the exchange is requesting. History Associates Inc., a consultant firm hired by this company, has assailed that timeline in a complaint. it accused the SEC of dragging its feet in producing the documents.
Is the SEC Hiding Something?
Coinbase’s FOIA requests seek records pertaining to two closed probes. One involves Enigma MPC, a startup that settled with the SEC in 2020 over allegations that its token sale violated securities laws.
One of them concerns Zachary Coburn, the founder of the decentralized trading platform EtherDelta,. He settled charges with the SEC in 2018 for failing to register as an exchange. The exchange seeks documents on how that investigation went. That could be persuasive in current crypto regulation.
It also also filed identical FOIA requests with the FDIC related to “pause letters” to financial institutions for the 2022-2023 year. The letters purportedly called on the banks to delay expanding crypto-related activities. It also seeked more information that might be part of the so-called “Operation Choke Point 2.0.”
Under that legal process, the next step is a judge’s decision on whether the exchange can file a motion for partial summary judgment. If the motion is allowed, the SEC could reply. Still, a final ruling is unlikely before the end of the year, according to Coinbase’s CLO Paul Grewal.
Coinbase isn’t the only one who decided to sue the SEC. Just recently, Crypto Com took it a step further and filed a lawsuit against the SEC as well.
The outcome of this case will be a landmark judgment that will have very significant effects on the legal landscape surrounding cryptocurrencies, mainly because it squarely deals with some fundamental questions relating to regulatory clarity about the nature of digital assets under securities law.
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