Coinbase Is Ready To Challenge The SEC’s Lawsuit
Coinbase’s employee policies say that material nonpublic information includes information about a decision to list, not list, or add features to a Digital Asset
Coinbase recently added bitcoin cash to its list of tradable assets. The announcement sparked a massive surge in trading volume on global exchanges. Some exchanges saw bitcoin cash close as high as $4,000, up from $2,200 a day earlier. Coinbase’s volume increased by over 380% in the week following the announcement.
The Company’s employee policies state that “material nonpublic information” includes information related to a decision to list, not list, and add features to a Digital Asset. The policies also prohibit Coinbase’s employees from disclosing information that is in violation of these policies.
Wahi worked for Coinbase as a manager in October 2020. His team handled the announcements of new listings on Coinbase. Because of his role, he was regularly provided with material nonpublic information and was privy to important information about the process of listing crypto assets on the platform. Because of his advanced knowledge of Coinbase’s listing process, he is a covered employee under Coinbase’s employee policies.
The Federal Reserve Commission should begin a public discussion of how to regulate this industry. Recent events can inform the regulatory path forward, and the lessons learned can guide the industry in building new products and infrastructure. Establishing regulatory guardrails will be critical for the future success of the digital asset industry in the United States.
In response to the concerns, Coinbase has submitted a petition to the SEC for new rules on digital asset securities. The company argues that current rules do not meet the goals of the Commission and do not provide transparency and fair notice to market participants. It believes that new rules on digital asset securities will create a more efficient allocation of capital in the financial markets, as well as new investment opportunities.
The employee policies of Coinbase state that material nonpublic information includes information about determining whether to list, not list, or add features of a Digital Asset. Consequently, it is important for employees to understand these policies and seek independent legal advice before making investment decisions. In addition to providing financial services to regulated cryptoassets, Coinbase also plans to build new tools for crypto-asset trading. These tools will allow businesses and institutions of all sizes to invest in the crypto market. Coinbase plans to expand its business to countries where it does not currently operate.
Employee policies of Coinbase state that employees must maintain confidentiality of material nonpublic information. This includes information about a decision to list, add features, or remove a Digital Asset.
It could challenge the SEC’s civil case
Coinbase could challenge the SEC’s lawsuit in a few ways. The company has a stringent review process for digital assets and has been inspected by the SEC. The review process analyzes security, regulatory compliance, and information security aspects of a particular digital asset. In addition, some industry watchdogs noted that Coinbase appeared to spin the news story in a way that would gain positive coverage. While the SEC may be leery of pursuing a suit against Coinbase, the company does have the financial resources to vigorously litigate its case.
The SEC’s case has far-reaching implications. The agency is asserting that nine of the tokens on Coinbase’s platform are securities. It cites extensive marketing efforts by issuers and the prospect of robust secondary market trading to support this position. However, the SEC has yet to come to a final decision on the matter.
If the SEC deems Coinbase’s services to be securities, it may be subject to penalties. The company’s executives have been adamantly critical of the SEC. The SEC’s actions could ultimately determine the company’s future. Nonetheless, it appears that Coinbase’s executives have no plans to stop listing cryptocurrencies on its platform, despite the SEC’s concerns.
While the SEC’s case against Coinbase and three employees has remained largely unfounded, the company has invested heavily in policies and systems to protect its customers. For instance, it has launched an investigation into three men, including one of its top executives, and has allegedly disclosed that information to the Justice Department. Coinbase subsequently fired Ishan Wahi from the company.
The SEC’s actions against Coinbase are an escalation of the current debate on how to classify digital assets. The CFTC has publicly criticized the SEC’s actions, suggesting a lack of coordination between the agencies. Furthermore, despite the Lummis-Gillibrand bill, the current regulatory framework does not provide a clear path forward. Instead, the government’s regulatory efforts will likely be decided through the federal courts.
It could waive rules to better suit digital assets
While it’s still unclear whether Coinbase will waive its rules to allow digital assets, it has taken steps to ensure its customers’ protection. Coinbase has a policy that prevents the sale of digital assets that are known to defraud consumers. If it finds that a digital asset has been defrauded, it could face enforcement action from the SEC.
