In an intriguing turn of events, the U.S. Securities and Exchange Commission (SEC) has urged a federal judge to dismiss a motion by Coinbase Global Inc. The cryptocurrency exchange had filed a petition last year, seeking clarity on the application of securities laws to digital currencies.
Coinbase, the leading cryptocurrency exchange in the U.S., lodged the request last month. The company has been vocal in its criticism of the SEC, suggesting the agency's response to its petition has been neither timely nor reasonable. Coinbase is advocating for a formal notice-and-comment process to allow public contributions.
However, the SEC's counter-argument in a recent court filing rejects Coinbase's claims as unfounded. The filing asserts that Coinbase's desire for swifter or alternative regulatory action does not warrant extraordinary intervention from the court. The SEC's lawyers firmly advise that the petition should be dismissed.
SEC Chair Gary Gensler has consistently maintained that most digital assets fall under securities laws. He asserts that the existing rules are clear and accuses crypto firms of consciously choosing not to comply with them.
The rapport between Coinbase and the SEC has become increasingly strained in recent years. A notable flashpoint occurred in 2021 when the SEC issued a Wells Notice — an intent to sue — over Coinbase's proposed lending product. This resulted in Coinbase abandoning the initiative. However, CEO Brian Armstrong lambasted the SEC's actions as dubious.
These developments have fueled apprehension about the potential impact of the SEC's actions on Coinbase. Mark Palmer of Berenberg Capital Markets estimates that at least 37% of Coinbase's first-quarter net revenue stemmed from non-Bitcoin streams. He suggests that these revenue sources could be the SEC's prime target in an expected enforcement action.