Late Monday, the US Securities and Exchange Commission (SEC) submitted a memorandum to the Southern District Court of New York, pleading for the rejection of Coinbase’s (NASDAQ: COIN) extensive discovery demands, including personal crypto related emails by chairman Gary Gensler. The SEC characterizes these requests as “breathtakingly broad,” arguing that they are not only extraneous but also impose an undue burden on the regulator.
For The Entire Crypto Industry: Coinbase Presses SEC
At the heart of this litigation is the SEC’s assertion that Coinbase operated as a securities exchange without proper registration, thereby violating federal securities laws. The commission’s charges against Coinbase hinge on the platform’s alleged failure to register as a securities exchange or broker-dealer while offering crypto assets that qualify as securities under US law.
The SEC’s filing articulates a strong opposition to Coinbase’s motion to compel the production of an exhaustive array of documents. This includes internal SEC communications and deliberations, as well as interactions with other entities and individuals concerning crypto assets. The regulator insists that the dispute should center on Coinbase’s activities and the specifics of the assets it offers, not on the SEC’s internal operations or its viewpoints on regulatory approaches.
“The core of this action is whether Coinbase failed to register its operations while conducting activities that squarely fall under the purview of securities transaction,” the SEC’s memorandum states. It highlights the supposed irrelevance of the agency’s internal policies and external communications to the fundamental legal questions at stake.
The SEC has disclosed that it has already produced over 240,000 documents from its investigative files on Coinbase and related crypto assets, alongside a detailed log of privileged documents it has withheld from production. Coinbase, by contrast, has produced a notably smaller batch of 2,162 documents and has not submitted a corresponding privilege log.
In its motion, Coinbase has requested the SEC to search through and produce documents from every communication pertaining to “the application of the securities laws to digital assets.” This includes seeking materials from high-level SEC officials and an array of external communications spanning several years. The SEC condemns these demands in their memorandum as disproportionate because of the lack of “substantial relevance” to the charges against Coinbase.
A notable point of contention is Coinbase’s request for a “sample” of the SEC Chair’s personal email, predicated on public statements that his views do not necessarily represent those of the Commission or its staff. The SEC refutes this demand, asserting that such a search is irrelevant to the case and represents an overreach.
“The views expressed by the SEC Chair in his official capacity are his own and do not bind the Commission or represent a consensus of its members,” the filing explains, underscoring that personal emails of SEC officials bear no relevance to Coinbase’s compliance with securities laws.
The SEC’s memorandum argues that the extensive nature of Coinbase’s discovery demands would not only strain the agency’s resources but also divert attention from the substantive legal issues needing resolution. The regulator warns of setting a precedent where regulatory bodies could be compelled to disclose vast internal communications and deliberations in legal disputes, potentially affecting how agencies engage with regulated entities moving forward.
Coinbase’s Chief Legal Officer (CLO), Paul Grewal, commented via X: “Today SEC 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 least they owe to those they target – and the public – is transparency.”
At press time, COIN traded at $189.47.
