The Commission should not want to litigate either," Coinbase wrote in its response. "Coinbase has never wanted to litigate with the Commission. "The SEC generally does not acknowledge the existence or non-existence of any investigation unless or until charges are filed," a spokesperson for the SEC told CNBC. "Coinbase's retail staking services fail all four prongs of the Howey test," Coinbase's response said.Ĭoinbase is represented by Sullivan & Cromwell. Courts have already been reluctant to extend "Howey's reach to include the secondary trading of assets where no issuer is involved," Coinbase's response noted.Ĭoinbase also issued a point-by-point repudiation of Howey's applicability to the exchange's staking service. The Nasdaq and the New York Stock Exchange are also secondary markets for U.S. The four elements Howey requires to determine whether transactions constitute investment contracts are: an investment, in common enterprise, reasonable expectation of profit, derived from the work of others.Ĭoinbase is a secondary market, meaning that investors buy and sell assets that they already own rather than purchasing them directly from an issuer. Securities lawyers rely on something known as the Howey test, from a Supreme Court case in which the SEC sued a Florida orange grove operator for a leaseback and profit-sharing arrangement involving the sale of oranges. crypto industry, Coinbase also argues that proposed charges rely on "flawed and untested" theories involving investment contracts, spot markets and custody services. Perhaps most consequentially for the rest of the U.S. Coinbase also noted that the SEC could have denied the company permission to go public in 2021, when it reviewed Coinbase's S-1 filing. at large.Ĭoinbase noted that the company's yearslong efforts to cooperate with SEC securities staff produced no concerns from SEC staffers until recently. To date, the SEC has never approved a crypto-asset entity as a national securities exchange, despite an extensive dialogue with Coinbase over the years.Įxecutives at the crypto firm have signaled for months that Coinbase is ready to grapple with the SEC in an existential case not just for Coinbase but the future of the crypto industry in the U.S. If the SEC succeeded, it could force Coinbase to close down those units. The SEC has used unregistered offering and sale violations to force other crypto exchanges to close services in the U.S., including the crypto exchange Kraken's staking-as-a-service product. The SEC's warning to Coinbase noted that the regulator would allege Coinbase was offering and selling unregistered securities, in violation of federal law. The SEC indicated to Coinbase in the Wells notice in March that its spot trading, staking, custody and institutional trading businesses were at risk. Separately, Grewal told CNBC, "At the time when we went public we had detailed discussions with the SEC about the very aspects of our business that are now - two years later - the subject of the Wells notice. Personal Loans for 670 Credit Score or Lower Personal Loans for 580 Credit Score or Lower Best Debt Consolidation Loans for Bad Credit
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