Coinbase has filed a motion in a Washington, D.C. court asking for partial summary judgment to obtain internal SEC documents.
The lawsuit calls for the SEC to hand over records about its approach to enforcing against cryptocurrency. Coinbase argued the records are crucial to understanding regulatory expectations. In response to the request, the SEC claimed it would take three years to re-review the documents, pleading legal exemptions.
Coinbase Accuses SEC of Obstructing Transparency
According to the Coibase legal team, the SEC has continually obstructed its attempts to gain information through Freedom of Information Act (FOIA) requests. The exchange states that the SEC denied the requests, citing FOIA Exemption 7(A) to withhold documents tied to active law enforcement cases.
Coinbase now claims that the exemption no longer applies. Nonetheless, the SEC has delayed the release by proposing a new three-year review.
Coinbase Chief Legal Officer, Paul Grewal posted on X that the DDC should “end this nonsense.”
There were several supporting responses to this post, expressing discontent, including an anonymous user commenting that the SEC needs to be dissolved. They added that this is tyrannical behavior and that there is no real enforcement.
The said documents relate to how cryptocurrencies such as Ether (ETH) can be considered securities. This could affect many industry projects. Coinbase insists these records are necessary because the SEC does not provide clear guidance on how a firm can assuage security concerns.
Legal Dispute Builds on Past SEC Investigations
The Coinbase lawsuit is part of several recent SEC investigations and enforcement actions involving crypto companies. Coinbase’s FOIA requests include specific cases, which include cases such as Ether’s switch to proof of stake, Enigma MPC, and the unsuccessful case against EtherDelta founder Zachary Coburn.
The firm retained History Associates Inc., a consultant firm, which submitted FOIA requests in July and August 2023 asking for investigatory documents. The SEC responded with three redacted pages, hiding the rest under Exemption 7(A).
According to Coinbase, the SEC’s latest delay tactics violate FOIA’s purpose of providing timely access to public records. In another development, crypto exchange Crypto.com sued the SEC after receiving a Wells Notice from the SEC.
The exchange said the SEC stepped over its authority by treating cryptocurrencies as securities without a clear legal framework.
SEC Faces Pushback Amid Broader Crypto Regulation Efforts
Coinbase’s legal complaint also adds that the SEC refused to share documents regarding the Federal Deposit Insurance Corporation (FDIC). The exchange requested information about ‘pause letters’ issued by the FDIC to banks directing them to temporarily halt crypto-related activity.
As Coinbase puts it, these letters are part of a larger regulatory effort, ‘Operation Choke Point 2.0,’ against the crypto industry.
Recently, the SEC has come under increasing criticism for its lack of transparency and its heavy-handed enforcement actions against digital asset firms. According to Coinbase, regulatory withholding of records is confusing. There is a need for clarity in the crypto industry.
The court has yet to rule on a motion for partial summary judgment. If Coinbase wins, the SEC must explain why records can no longer be released on time.
