Coinbase suggests SEC action is motivated by Gary Gensler’s own views

Coinbase executives discussed their company’s ongoing conflict with the U.S. Securities and Exchange (SEC) in a new video on April 27.

Coinbase doesn’t list securities; situation hasn’t changed

Coinbase Chief Legal Officer Paul Grewal responded to the SEC’s recent Wells notice, stating:

“[The SEC] has reached a preliminary determination that aspects of our company’s core business violate securities laws, so I want to be very direct … Coinbase does not list securities.”

He said that Coinbase has “mostly gotten silence in response” during its interactions with the SEC but otherwise described the SEC’s public statements.

Grewal said that in 2021, the SEC seemingly admitted that it had no framework or statutory authority to regulate crypto companies with. However, the SEC appeared to adopt a new stance when FTX collapsed in 2022, at which time SEC Chair Gary Gensler said:

“I feel that we have enough authority — I really do — in this space to regulate crypto companies.”

Grewal suggested that this new statement did not coincide with other changes, such as new legislation from Congress or new rulemaking at the SEC itself.

He also said that the SEC permitted Coinbase to operate as a publicly traded company in 2021. Grewal said his firm has not fundamentally changed since then, and as such, the SEC’s actions cannot be motivated by changes at Coinbase or new SEC discoveries.

Coinbase would prefer not to go to court

Grewal concluded that Coinbase does not know which of its activities the SEC takes issue with — and although Coinbase is willing to go to litigation, it would prefer not to do so.

He said that, to avoid litigation, the SEC must identify which assets are securities or state which parts of Coinbase’s business must be registered. Coinbase is willing to set up registered securities trading for certain activities if told to do so, Grewal said.

Meanwhile, Coinbase CEO Brian Armstrong said that his firm is “committed to working within the regulatory perimeter” but asserted that a Wells notice when there is no clear rulebook is “not constructive.” Coinbase is prepared to defend this in court, he said.

Coinbase first acknowledged that it had received a Wells notice on March 22 and said that the notice is likely a precursor to charges from the SEC.

Coinbase filed an action against the SEC on April 25 in an attempt to compel it to respond to its petition. Executives also visited regulators in person at that time.

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