Cryptocurrency exchange Coinbase has filed an amicus brief in support of a motion to dismiss a case filed by the United States Securities and Exchange Commission (SEC) against former Coinbase product manager Ishan Wahim and others for insider trading. Coinbase condemns the defendants’ conduct, it he said in short, but supports the defendants’ motion due to the SEC’s assumption that the listed securities exchange on its platform.
Coinbase said in its amicus (“friend of the court”) filing that it fully cooperated with the investigation of Wahi, his brother and their friend, and indicated that it was also convicted in the case:
“The SEC is asking this court to rule on the issues at the heart of Coinbase’s listing decision […] in a lawsuit against unsympathetic defendants who stole Coinbase’s non-public information.
The exchange declined to sell securities, but said it would be happy to sell digital asset securities if not for the “state of uncertainty” in regulation:
“Coinbase would like to expand its platform to include digital asset securities (such as tokenized stocks), but no US company can do that until the SEC provides a clear regulatory framework.”
It also noted that the Justice Department did not bring Securities Act charges against the defendants in its case. Ishan Wahi in that case he pleaded guiltyand his brother also pleaded guilty.
Arguing that it does not sell securities, Coinbase said the SEC approved its 2021 IPO without saying that the exchange’s business model could allow for the sale of securities or that it would sell securities. Coinbase further argued that its listing failed the oft-cited Howey test, set forth by the US Supreme Court in 1946, because it is neither an investment nor a contract under it.
Related: US authorities have arrested a former Coinbase executive allegedly insider trading cryptocurrencies
Coinbase also cited the major questions doctrine, reaffirmed last year by the U.S. Supreme Court in West Virginia v. EPA, which set the limits of agency overreach. Industrial advocacy groups the Digital Chamber of Commerce and the Blockchain Association made similar points in their own amicus briefs.
Last week, I testified in Congress about Coinbase’s futile effort to register with the SEC so we could begin offering digital asset securities. Today, we filed an amicus brief in SEC v. Wahi that explains why this misleading suit only makes matters worse. 1/5https://t.co/9iWYrWwpiI
— paulgrewal.eth (@iampaulgrewal) March 14, 2023
The report concluded that the SEC’s actions violate “fundamental principles of fair notice and due process and raise serious concerns under the APA [Administrative Procedure Act]. “Coinbase is seeking more SEC involvement with the cryptocurrency industry, not less. But the engagement must have the right form,” he concluded.