After a victory in federal court, lawyers for cryptocurrency exchange Coinbase may soon have access to United States Securities and Exchange Commission documents related to the regulator’s application of tokens as securities.
In a Sept. 5 filing in the US District Court for the Southern District of New York, Judge Katherin Failla granted in part and denied in part Coinbase’s motion to compel discovery from the SEC. The exchange had been fighting with the commission since July over the scope of its request to compel the SEC to produce documents related to the regulator’s approach to digital assets.
According to Coinbase chief legal officer Paul Grewal, the Sept. 5 order would result in the SEC producing “important discovery” for the civil case. The SEC filed an enforcement action against Coinbase in June 2023, alleging the firm had been operating as an unregistered securities exchange, broker and clearing agency.
Source: SDNY
Coinbase filed a motion to compel discovery from the SEC on July 23, claiming that the commission had failed to produce documents concerning “tokens and services and the application of the securities laws to digital assets,” the firm’s initial public offering, and Chair Gary Gensler’s statements on digital assets. The SEC argued in August that Coinbase’s requests were overly broad, claiming that the firm was seeking irrelevant material disproportionate to the needs of the civil case.
Ongoing enforcement actions
The SEC case against one of the largest US-based crypto exchanges could have broad implications for other firms allegedly offering unregistered securities. The commission has several enforcement cases currently going through the courts. In August, a judge ruled Ripple Labs was liable to the SEC for $125 million after a three-year court cattle.
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Coinbase’s partial victory in federal court came the same day a New Jersey judge ruled that a group of investors had the right to file an amended class-action lawsuit against the crypto exchange. The heart of the case was centered on Coinbase allegedly concealing that crypto assets listed on the exchange “were likely securities to grow its business and boost revenues.”
The ruling could open the floodgates for class-action lawsuits filed in other jurisdictions, making similar allegations against the crypto exchange. However, recent Supreme Court opinions that could limit the SEC’s authority over crypto and the upcoming 2024 US election — potentially impacting SEC leadership — could have repercussions for any lawsuit involving the regulatory body.
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