SEC: Action Against Coinbase Is Part Of US Regulatory Authority

The Coinbase crypto exchange filed a lawsuit against the SEC. (Photo; Doc. Myfinasset)

JAKARTA - The US Securities and Exchange Commission (SEC) has responded to the latest filing filed by Coinbase regarding the lawsuit the exchange received from regulators. The filing tries to reject any statements made by Coinbase to underestimate allegations made by the SEC against abuses of non-registered brokers and securities.

In its response, the SEC reiterated its jurisdiction in securities cases and stated that legal action against Coinbase was part of "the long-standing implementation of its authority to enforce legal requirements."

The SEC refers to the authority granted by Congress in 1934 to use civil law enforcement measures. This view is in contrast to Coinbase's view of the opinion that the SEC has no "any force to regulate digital asset exchange."

Furthermore, the SEC explained that Coinbase is currently criticizing the validity of Howey's test after previously using these criteria to make a recording decision before becoming a public company.

In its response, the SEC stated that Coinbase "trys to make its own tests to determine what is an investment contract" by making wrong assumptions about what the Howey test explains. Howey's test is a series of considerations that help determine whether a transaction is classified as an investment contract subject to securities laws.

The SEC also criticized the use of the doctrine of key questions Coinbase used. This doctrine is a principle that places the action of Congressional regulations over administrative agencies. The SEC explains that "since its inception, the SEC has used the authority to pursue violations of securities laws - and uses the same law enforcement powers here."

However, the SEC's response did not address the change in attitude made by SEC Chairman Gary Gensler. Initially, Gensler acknowledged that the SEC "does not have the legal authority to regulate businesses like Coinbase" in congressional hearings in May 2021. However, since then, Gensler has indicated his belief that the SEC has sufficient "a sufficient authority" in 2022.

Paul Grewal, Coinbase's Chief of Law (CLO), who previously stated that the SEC's interpretation of investment contracts violates the law, commented on this response by saying that the SEC's filing "fortunately... more than that."