The U.S. Securities and Exchange Commission (SEC) has claimed in court regarding the Coinbase case that the agency’s decision to approve a company’s S-1 application does not represent a “blessing” from it. Additionally, it does not offer evidence that the company complies with regulations.
According to court filings from the pre-motion hearing in the SEC v. Coinbase lawsuit on July 13, the SEC claimed that when it approved Coinbase’s plan to go public in April 2021, it was not approving of the company’s organizational structure.
SEC trial attorney Peter Mancuso said there is no proof that the SEC examined certain assets, made specific conclusions, and then assured the exchange that this wouldn’t eventually be determined to be a security.
The implications of such claims were discussed on cryptocurrency Twitter by many users, including Gemini co-founder Cameron Winklevoss, who questioned why the SEC would permit a reportedly non-compliant company to go public first, given that its main objective is to protect American customers.
Coinbase and SEC battle it out in court
Judge Katherine Polka Faila of the U.S. District Court for the Southern District of New York grilled both sides on a variety of issues during a pre-motion hearing on Thursday that lasted more than two hours, including a brief break where both parties huddled to discuss a federal judge’s decision on the SEC’s separate Ripple lawsuit. These issues included the definition of staking, Coinbase’s IPO filings, and the application of the major questions doctrine.
The Commission’s earlier approval of the exchange’s S-1, an SEC registration form necessary for a business to execute an initial public offering (IPO), was a major topic of discussion. Several digital assets that the SEC claimed were unregistered securities when it filed its lawsuit against Coinbase were allegedly trading on the site when the SEC approved Coinbase’s S-1, according to Coinbase’s legal team.
While the SEC said that allowing the company to go public did not necessitate that it was a “blessing,” Judge Faila questioned whether it was within the SEC’s power to have Coinbase register as a securities exchange. Further, she highlighted that it wasn’t crazy that Coinbase thought their trading was okay based on S-1 issuance.
Judge Faila then asked the parties to develop a “realistic schedule” for the remaining portion of the hearing, considering her “very busy” docket that stretched into October.
