Coinbase CLO Highlights SEC Inconsistencies in Digital Asset Securities Claims

• Coinbase CLO criticizes SEC for contradictory claims in digital asset cases.
• SEC accused of presenting inconsistent legal arguments in separate lawsuits.
• Coinbase continues to challenge SEC’s unclear regulatory approach for cryptocurrencies.

Paul Grewal, Coinbase’s Chief Legal Officer, has raised concerns over inconsistencies in the U.S. Securities and Exchange Commission’s (SEC) stance on digital asset regulations.

According to Grewal, the SEC has presented conflicting arguments in separate cases, adding to the growing criticism of the regulator’s approach toward cryptocurrency regulation.

The latest controversy stems from the SEC‘s reply brief in the ongoing Lejilex lawsuit. In this case, the SEC argued that the nature of a digital asset does not determine whether a transaction qualifies as a securities transaction. Grewal pointed out that this contradicts the Commission’s earlier position in another case before Judge Failla, where it argued the exact opposite.

Coinbase, which has been actively supporting Lejilex, has previously expressed its concerns over the SEC’s regulatory overreach in the crypto space. In July, the company filed an Amicus Brief challenging the Commission’s actions, reiterating its demand for clear and consistent guidelines for the industry.

Grewal emphasized that the SEC’s inconsistent arguments across different lawsuits create confusion and undermine trust in regulatory authorities. He argued that this inconsistency is unacceptable, especially as it impacts millions of Americans who hold cryptocurrencies. 

Grewal also highlighted that regulating by enforcement restricts innovation, harms consumers, and negatively affects the U.S. economy.

Meanwhile, Coinbase’s own lawsuit against the SEC has seen delays, with the regulator requesting an extension to complete discovery. The SEC’s request to push the deadline to February 2024 has paused the legal proceedings.

As a result, Coinbase has moved it to compel the Commodity Futures Trading Commission (CFTC) to disclose communications with the issuers of tokens mentioned in a connected SEC suit. 

Correspondingly, there is Ripple Labs, another key example of the work of the SEC or rather a company’s fight with the SEC, which raises the issue of XRP as a security. This is due to recent events where the SEC filed an appeal after an earlier judgement went in Ripple’s favour, and many legal minds supporting Ripple think that the Commission has little hope of success in the appeal.