TLDR
- The SEC has filed a motion to deny Coinbase’s request for additional documents, including emails from SEC Chair Gary Gensler
- The SEC argues that Coinbase’s document requests are overly broad and disproportionate to the needs of the case
- The agency claims it has already provided over 240,000 documents and says processing an additional 3 million documents would be burdensome
- Coinbase argues the documents are necessary to show the SEC’s inconsistent views on digital assets and regulatory reach
- The legal battle stems from the SEC’s June 2023 lawsuit against Coinbase for allegedly operating as an unregistered securities exchange
The U.S. Securities and Exchange Commission (SEC) has filed a motion to deny Coinbase’s request for additional documents in their ongoing legal dispute, arguing that the cryptocurrency exchange’s demands are overly broad and disproportionate to the needs of the case.
In a court filing on August 5, 2024, the SEC pushed back against Coinbase’s efforts to subpoena emails from SEC Chair Gary Gensler and obtain what the agency describes as “essentially all documents that in any way relate to crypto assets.”
The regulator claims that Coinbase’s request for further documents and evidence is “disproportional” to the case’s requirements and lacks legal precedent.
The SEC stated that it has already produced over 240,000 documents relevant to Coinbase and is in the process of searching another 117,000 documents for responsive material. The agency argues that complying with Coinbase’s additional requests would require processing approximately three million more documents, a task it deems excessively burdensome and time-consuming.
“The burden of searching and producing or logging, one by one, an additional three million irrelevant external or assuredly privileged internal SEC documents that Coinbase’s limitless request entails is thus entirely disproportional to the needs of the case,”
the SEC wrote in its court filing.
The regulator contends that many of these additional documents would likely be subject to privilege claims, necessitating a manual review process that would far exceed the 400 hours the SEC claims it has already spent on document production for this case.
Coinbase, however, maintains that these documents are crucial to its defense. Paul Grewal, Coinbase’s Chief Legal Officer, argued in a post on social media platform X that the requested documents are necessary to demonstrate “the record of the SEC’s inconsistent views of digital assets and its own regulatory reach.”
The exchange believes that the SEC’s internal discussions and communications with market participants could reveal a lack of clarity in the agency’s guidelines on what constitutes a security in the cryptocurrency context.
“If the SEC is going to engage in an unprecedented regulation by enforcement campaign, the least they owe to those they target – and the public – is transparency,” Grewal stated.
Update: Today @SECGov filed its response to our request to produce important documents showing the record of the SEC’s inconsistent views of digital assets and its own regulatory reach. If the SEC is going to engage in an unprecedented regulation by enforcement campaign, the… https://t.co/MxQ1omDGN3
— paulgrewal.eth (@iampaulgrewal) August 5, 2024
The legal battle between the SEC and Coinbase began in June 2023 when the regulator sued the exchange, alleging that it operates an unregistered securities exchange, broker, and clearing agency. The SEC identified 13 crypto assets that it deemed securities, claiming that Coinbase had been operating as an “unregistered securities broker” since 2019.
Coinbase has consistently argued that the SEC is overstepping its regulatory authority and has failed to provide clear guidelines on what constitutes a security in the cryptocurrency space. The exchange claims that the documents it seeks will demonstrate this lack of clarity and the SEC’s inconsistent approach to regulating digital assets.
Despite Coinbase’s arguments, the company has faced setbacks in its document requests. In early July, a U.S. judge stated that Coinbase’s justifications for the subpoena were unimpressive, noting that the company’s “reservoir of credibility” had been drained.
Nevertheless, Coinbase has continued to push for access to these documents, considering them a “critical” part of its defense strategy.
As the legal battle continues, both parties remain steadfast in their positions. The SEC maintains that it has “more than satisfied its discovery obligations,” while Coinbase insists on the necessity of greater transparency from the regulator.
