Coinbase has long been seen in crypto circles as a leader in regulatory compliance after acquiring an array of state and federal licenses in its early days.
Coinbase’s blitz against the SEC offers a prelude to what could be the crypto market’s biggest showdown yet. | Leon Neal/Getty ImagesWhen Brian Armstrong and Fred Ehrsam launched Coinbase more than a decade ago, they made an unconventional choice for a startup in the libertarian-leaning cryptocurrency market: They would embrace, not reject, regulation.In the five weeks since the Gary Gensler-led Securities and Exchange Commission warned that it was, Coinbase — the largest U.S.
“Everything is on the line,” said Emily Garnett, a former SEC attorney who is now a shareholder at Brownstein Hyatt Farber Schreck.Under Gensler, who was sworn in as chair just days after Coinbase went public two years ago, the SEC has been aggressively cracking down on the crypto market’s gatekeepers. But the enforcement campaign took on new speed after Sam Bankman-Fried’s FTX, the once-lionized crypto exchange, collapsed late last year.
Gensler says much of the crypto market consists of tokens that are akin to stocks and bonds, so companies trading or listing them need to be registered with the agency — just as if they were the New York Stock Exchange or Charles Schwab. Coinbase went further to say that the SEC’s looming charges would be an “abrupt about-face” from when the agency signed off on the company’s paperwork to go public in April 2021. The approval, Coinbase argued, allowed investors to infer that the SEC took no issue with its core business. The response was written by Steven Peikin, an attorney at Sullivan & Cromwell representing Coinbase who previously served as the SEC’s co-head of enforcement.
The SEC has appeared recently to be building up a foundation for the Coinbase action, though, securities lawyers say.
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