A federal judge in New York says the U.S. Securities and Exchange Commission (SEC) could have given Coinbase a warning that it may be violating securities laws before applying for public approval.
The SEC filed a lawsuit against Coinbase in June, alleging that the Nasdaq-listed company had sold unregistered securities.
Speaking at the pre-trial conference, SEC attorney Peter Mancuso said the agency’s approval of Coinbase’s S-1 filing to conduct an initial public offering (IPO) does not mean the committee has ever given its stamp of approval. given to the entire crypto exchange company.
“Just because the SEC allows a company to go public does not mean that the SEC is blessing the underlying company or corporate structure or saying that the underlying corporate structure does not violate the law.
No evidence is being brought forward that the SEC looked at specific assets and made specific determinations and then gave Coinbase solace that this would not be a security later on.
District Judge Katherine Polk Failla says she wonders why the SEC didn’t pre-warn Coinbase about regulatory gray areas. She says the agency could have issued the exchange advisory or warning before the public listing was greenlit.
“I am not saying that the committee should be omniscient at the time of reviewing a registration statement and that it should know everything. But I would have thought the committee was diligent about what Coinbase was doing, and somehow I thought it would say, you know, you really shouldn’t be doing this. This is against securities laws, or we’re in some interesting uncharted territory here in terms of whether the assets on your platform are securities, so be warned there could be a problem one day.
The judge also says it makes sense for Coinbase to assume it was clear since the crypto exchange received no warning from the SEC prior to the IPO.
“You could never have said to them, ‘Hey, you need to register as a stock exchange.’ That was within the SEC’s power to do, wasn’t it…?
In Failla parlance, it’s no surprise that Coinbase thinks what they were doing was okay, because it was exactly what you made them do when they released the S-1.
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